-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GARgpQqgqJv7IMCS+mt88sO/tWRKxiBb69WjDG+sCAfQQTyimjB4aFfLnsAiEjZL fBhgYu9yBHqvyySSFWxzgw== 0000950137-01-000750.txt : 20010224 0000950137-01-000750.hdr.sgml : 20010224 ACCESSION NUMBER: 0000950137-01-000750 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20001202 FILED AS OF DATE: 20010222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLARCOR INC CENTRAL INDEX KEY: 0000020740 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 360922490 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-11024 FILM NUMBER: 1551762 BUSINESS ADDRESS: STREET 1: 2323 SIXTH ST STREET 2: PO BOX 7007 CITY: ROCKFORD STATE: IL ZIP: 61125 BUSINESS PHONE: 8159628867 MAIL ADDRESS: STREET 1: 2323 SIXTH STREET CITY: ROCKFORD STATE: IL ZIP: 61125 FORMER COMPANY: FORMER CONFORMED NAME: CLARK J L MANUFACTURING CO /DE/ DATE OF NAME CHANGE: 19871001 10-K405 1 c59555e10-k405.txt ANNUAL REPORT 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K
(MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 2, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________________ COMMISSION FILE NUMBER 1-11024
CLARCOR Inc. --------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 36-0922490 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2323 Sixth Street, P.O. Box 7007, Rockford, Illinois 61125 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 815-962-8867 Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- Common Stock, par value $1.00 per share New York Stock Exchange Preferred Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None ---------------------------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] The aggregate market value (based on the closing price of registrant's Common Stock on February 1, 2001 as reported on the New York Stock Exchange Composite Transactions) of the voting stock held by non-affiliates of the registrant as at February 1, 2001 is $557,981,284. The number of outstanding shares of Common Stock as of February 1, 2001 is 24,462,933 shares. Certain portions of the registrant's 2000 Annual Report to Shareholders are incorporated by reference in Parts I, II and IV. Certain portions of the registrant's Proxy Statement dated February 23, 2001 for the Annual Meeting of Shareholders to be held on March 27, 2001 are incorporated by reference in Part III. 2 PART I ITEM 1. DESCRIPTION OF BUSINESS. (a) General Development of Business CLARCOR Inc. ("CLARCOR") was organized in 1904 as an Illinois corporation and in 1969 was reincorporated in the State of Delaware. As used herein, the "Company" refers to CLARCOR and its subsidiaries unless the context otherwise requires. The Company's fiscal year ends on the Saturday closest to November 30. For fiscal year 2000 the year ended on December 2, 2000 and included 53 weeks. For fiscal year 1999 the year ended on November 27, 1999 and included 52 weeks. In this Form 10-K, all references to fiscal years are shown to begin on December 1 and end on November 30 for clarity of presentation. (i) Certain Significant Developments. During Fiscal 2000 the Company adopted a "Total Filtration" strategy. Under the Total Filtration Program, the Company intends to supply every filter needed by a customer for its facilities and its manufacturing, transportation and construction equipment. Companies that now look to dozens of filter suppliers for thousands of different filter requirements will be able, under the Program, to purchase all of their filter requirements from one company, CLARCOR, thereby reducing administrative burdens and uncertainty about filter pricing, availability, delivery, performance and longevity. The Company is confident of its ability to serve its customers' total filtration needs because it believes that it now has the broadest range of filtration products in the industry. The Company will also assist customers in determining which filters they require in their operations, and with the servicing and installation of filters. While the program is now in its early stages, the Company believes that implementation of the Total Filtration concept over the next several years offers a significant opportunity to continue the growth of the Company. (ii) Summary of Business Operations. During 2000, the Company conducted business in three principal industry segments: (1) Engine/Mobile Filtration, (2) Industrial/Environmental Filtration and (3) Packaging. Engine/Mobile Filtration. Engine/Mobile Filtration includes filters for oil, air, fuel, coolants and hydraulic fluids for trucks, automobiles, construction, mining and industrial equipment, locomotives, marine and agricultural equipment. Industrial/Environmental Filtration. Industrial/Environmental Filtration products are used primarily for commercial, residential and industrial applications. The segment's industrial and environmental products include air and antimicrobial treated filters and high efficiency electronic air cleaners for commercial buildings, factories, residential buildings, paint spray booths, gas turbine systems, medical facilities, motor vehicle cabins, clean rooms, compressors and dust collector systems. The segment's process filtration products include specialty filters, industrial process liquid filters, filters for pharmaceutical processes, filtration systems for aircraft refueling, anti-pollution and water recycling, bilge separators and sand control filters for oil and gas drilling equipment. Packaging. Packaging products include a wide variety of custom styled containers and packaging items used primarily by the food, confectionery, spice, drug, toiletries and chemical specialties industries. The segment's products include lithographed metal containers, flat sheet decorated metal, combination metal and plastic containers, plastic closures and various specialties, such as spools for wire and cable and outer shells for dry cell batteries and film canisters. (b) Financial Information About Industry Segments Business segment information for the fiscal years 1998 through 2000 is included on pages 23 and 24 of the Company's 2000 Annual Report to Shareholders (the "Annual Report"), is incorporated herein by reference and is filed as part of Exhibit 13(a)(vi) to this 2000 Annual Report on Form 10-K ("2000 Form 10-K"). 2 3 (c) Narrative Description of the Business ENGINE/MOBILE FILTRATION The Company's engine/mobile filtration products business is conducted by the following wholly-owned subsidiaries: Baldwin Filters, Inc.; Clark Filter, Inc.; Hastings Filters, Inc.; Baldwin Filters (Aust.) Pty. Ltd.; Baldwin Filters N.V.; and Baldwin Filters Limited. In addition, the Company owns (i) 90% of Filtros Baldwin de Mexico ("FIBAMEX"), (ii) 75% of Baldwin-Weifang Filters Ltd., and (iii) 80% of Baldwin-Unifil S.A. The companies market a full line of oil, air, fuel, coolant and hydraulic fluid filters. The filters are used in a wide variety of applications and in processes where filter efficiency, reliability and durability are essential. Impure air or fluid flow through semi-porous paper, cotton, synthetic, chemical or membrane filter media with varying efficiency filtration characteristics. The impurities on the media are disposed of when the filter is changed. The segment's filters are sold throughout the world, primarily in the replacement market for trucks, automobiles, locomotives, marine, construction, industrial, mining and agricultural equipment. In addition, some first-fit filters are sold to the original equipment market. INDUSTRIAL/ENVIRONMENTAL FILTRATION The Company's industrial/environmental filtration products business is conducted by the following wholly-owned subsidiaries: Airguard Industries, Inc. ("Airguard"); Airklean Engineering Pte. Ltd.; Airguard Asia Sdn. Bhd.; Facet USA, Inc. and related Facet companies in Italy, Spain, the United Kingdom and other European locations ("Facet"); Filter Products, Inc.; Purolator Facet, Inc. ("PFI"); Purolator Products Air Filtration Company ("Purolator"); United Air Specialists, Inc.; and United Air Specialists (U.K.) Ltd. The segment's products are sold throughout the world. The companies market commercial and industrial air filters and systems, electrostatic contamination control equipment and electrostatic high precision spraying equipment. The air filters and systems remove contaminants from recirculated indoor air and from process air which is exhausted outdoors. The products represent a complete line of air cleaners with a wide range of uses for maintaining high quality standards in interior air and exterior pollution control. Additional products include specialty filters, filtration systems for aircraft refueling, anti-pollution and water recycling, and bilge separators. These products are used in a wide range of applications including commercial, military and general aviation, marine, oil and gas drilling and refining, chemical and pharmaceutical processes, utilities, paper mills and general industry. The filters are used for the process filtration of liquids using a variety of porous and sintered and non-sintered metal media filters, strainers, separators, coalescers and absorbent media. Many of these filter products and systems require special technical approvals and product certification in order to meet commercial and military requirements. PACKAGING The Company's consumer and industrial packaging products business is conducted by a wholly-owned subsidiary, J. L. Clark, Inc. ("J. L. Clark"). J.L. Clark manufactures a wide variety of different types and sizes of containers and packaging specialties. Metal, plastic and combination metal/plastic containers and closures manufactured by the Company are used in packaging a wide variety of dry and paste form products, such as food specialties (tea, spices, dry bakery products, potato chips, pretzels, candy and other confections); beverages and juices; cosmetics and toiletries; drugs and pharmaceuticals; and chemical specialties (hand cleaners, soaps and special cleaning compounds). Other packaging products include shells for dry batteries, film canisters, candles, spools for insulated and fine wire, and custom decorated flat steel sheets. Containers and packaging specialties are manufactured only upon orders received from customers, and individualized containers and packaging specialties are designed and manufactured, usually with distinctive decoration, to meet each customer's marketing and packaging requirements and specifications. 3 4 DISTRIBUTION Engine/Mobile Filtration and Industrial/Environmental Filtration products are sold primarily through a combination of independent distributors and dealers for original equipment manufacturers. The engine/mobile segment also distributes filtration products worldwide through each of its subsidiaries. Baldwin Filters N.V. and Baldwin Filters Limited primarily serve the European markets. Baldwin Filters (Aust.) Pty. Ltd., markets heavy duty liquid and air filters in Australia and New Zealand. FIBAMEX manufactures filters in Mexico with distribution in Mexico and Central and South America. Through the Company's investment in Baldwin-Weifang Filters Ltd., heavy duty filters are manufactured in China for distribution in China. Additionally, through Baldwin-Unifil S.A., air filtration products are manufactured in South Africa with distribution throughout Africa, Great Britain, Europe and the Middle East. The industrial/environmental segment also distributes and services filtration products through company-owned branches and wholly-owned subsidiaries located throughout the United States and Europe and in Singapore and Malaysia. Packaging salespersons call directly on customers and prospective customers for containers and packaging specialties. Each salesperson is trained in all aspects of J.L. Clark's manufacturing processes with respect to the products sold and is qualified to consult with customers and prospective customers concerning the details of their particular requirements. In addition, salespersons with expertise in specific areas, such as flat-sheet decorating, are focused on specific customers and markets. CLASS OF PRODUCTS No class of products accounted for as much as 10% of the total sales of the Company. RAW MATERIAL Steel, filter media, cartons, aluminum sheet and coil, stainless steel, chrome vanadium, chrome silicon, resins, roll paper, bulk and roll plastic materials and cotton, wood and synthetic fibers and adhesives are the most important raw materials used in the manufacture of the Company's products. All of these are purchased or are available from a variety of sources. The Company has no long-term purchase commitments. The Company did not experience shortages in the supply of raw materials during 2000. PATENTS, TRADEMARKS AND TRADENAMES Certain features of some of the Company's products are covered by domestic and, in some cases, foreign patents or patent applications. While these patents are valuable and important for certain products, the Company does not believe that its competitive position is dependent upon patent protection. The Company believes, however, that its trademarks and tradenames used in connection with certain products may be significant to its business. CUSTOMERS The largest 10 customers of the Engine/Mobile Filtration segment accounted for 20.6% of the $259,791,000 of fiscal year 2000 sales of such segment. The largest 10 customers of the Industrial/Environmental Filtration segment accounted for 15.1% of the $319,746,000 of fiscal year 2000 sales of such segment. The largest 10 customers of the Packaging segment accounted for 60.5% of the $72,611,000 of fiscal year 2000 sales of such segment. No single customer accounted for 10% or more of the Company's consolidated 2000 sales. 4 5 BACKLOG At November 30, 2000, the Company had a backlog of firm orders for products amounting to approximately $74,300,000. The backlog figure for 1999 was approximately $72,100,000. Substantially all of the orders on hand at November 30, 2000 are expected to be filled during fiscal 2001. COMPETITION The Company encounters strong competition in the sale of all of its products. The Company competes in a number of filtration markets against a variety of competitors. The Company is unable to state its relative competitive position in all of these markets due to a lack of reliable industry-wide data. However, in the replacement market for heavy duty liquid and air filters used in internal combustion engines, the Company believes that it is among the top five measured by annual sales. In addition, the Company believes that it is a leading manufacturer of liquid and air filters for diesel locomotives. The Company believes that for industrial and environmental filtration products, it is among the top five measured by annual sales. In the Packaging segment, its principal competitors include several manufacturers whose specialty packaging segments are smaller than the Company's and who often compete on a regional basis only. Strong competition is also presented by manufacturers of paper, plastic and glass containers. The Company's competitors generally manufacture and sell a wide variety of products in addition to packaging products of the type produced by the Company and do not publish separate sales figures relative to these competitive products. Consequently, the Company is unable to state its relative competitive position in those markets. The Company believes that it is able to maintain its competitive position because of the quality and breadth of its products and services and the broad geographic scope of its operations. PRODUCT DEVELOPMENT The Company's Technical Centers and laboratories test product components and completed products to insure high quality manufacturing results, evaluate competitive products, aid suppliers in the development of product components, and conduct controlled tests of newly designed filters, filtration systems and containers for particular uses. Product development departments are concerned with the improvement and creation of new filters, filtration systems, containers and packaging products in order to broaden the uses of these items, counteract obsolescence and evaluate other products available in the marketplace. In fiscal 2000, the Company employed 69 professional employees on a full-time basis on research activities relating to the development of new products or the improvement or redesign of its existing products. During this period the Company spent approximately $6,942,000 on such activities as compared with $5,562,000 for 1999 and $4,855,000 for 1998. ENVIRONMENTAL FACTORS The Company is not aware of any facts which would cause it to believe that it is in material violation of existing applicable standards respecting emissions to the atmosphere, discharges to waters, or treatment, storage and disposal of solid or hazardous wastes. The Company is party to various proceedings relating to environmental issues. The U.S. Environmental Protection Agency (EPA) and/or other responsible state agencies have designated the Company as a potentially responsible party (PRP), along with other companies, in remedial activities for the cleanup of waste sites under the federal Superfund statute. Environmental and related remediation costs are difficult to quantify for a number of reasons including the number of parties involved, the difficulty in determining the extent of the contamination, the length of time remediation may require, the complexity of environmental regulation and the continuing advancement of remediation technology. Applicable federal law may impose joint and several liability on each PRP for the cleanup. It is the opinion of management, after consultation with legal counsel, that additional liabilities, if 5 6 any, resulting from these matters are not expected to have a material adverse effect on the Company's financial condition or consolidated results of operations. The Company does anticipate, however, that it may be required to install additional pollution control equipment to augment existing equipment in the future in order to meet applicable environmental standards. The Company is presently unable to predict the timing or the cost of such equipment and cannot give any assurance that the cost of such equipment may not have an adverse effect on earnings. However, the Company is not aware, at this time, of any current or pending requirement to install such equipment at any of its facilities. EMPLOYEES As of November 30, 2000, the Company had approximately 4,560 employees. (d) Financial Information About Foreign and Domestic Operations and Export Sales Financial information relating to export sales and the Company's operations in the United States and other countries is set forth on page 24 of the Annual Report and is incorporated herein by reference and filed as Exhibit 13(a)(vi) to this 2000 Form 10-K. The Company is not aware of any unusual risks attendant to the conduct of its operations in other countries. ITEM 2. PROPERTIES. (i) Location An office building owned by the Company located in Rockford, Illinois houses the Corporate offices and the Packaging segment headquarters offices in 22,000 square feet of office space. Engine/Mobile Filtration. The following is a description of the principal properties utilized by the Company in conducting its Engine/Mobile Filtration business: The Baldwin Filters' Kearney, Nebraska plant contains 516,000 square feet of manufacturing and warehousing space, 25,000 square feet of research and development space, and 40,000 square feet of office space. The Kearney facility is located on a site of approximately 40 acres. A manufacturing facility located in Yankton, South Dakota has approximately 170,000 square feet of floor space on a 21 acre tract. Both facilities are owned by the Company. In addition, Baldwin has a capital lease for a 100,000 square foot manufacturing facility on a site of 20 acres in Gothenburg, Nebraska. The Company also manufactures filters in Lancaster, Pennsylvania at its Clark Filter plant. The building, constructed about 1968 on an 11.4 acre tract of land, contains 168,000 square feet of manufacturing and office space and is owned by the Company. The Company leases various facilities in Australia, Belgium, Mexico, South Africa and the United Kingdom for the manufacture and distribution of filtration products. Industrial/Environmental Filtration. The following is a description of the principal properties utilized by the Company in conducting its Industrial/Environmental Filtration business: Airguard has nine manufacturing and warehousing locations. It leases 318,000 square feet in New Albany, Indiana, 84,000 square feet in Corona, California, 44,500 square feet in Dallas, Texas and 83,000 square feet in Rockford, Illinois. Smaller facilities are also leased in North Carolina and Wisconsin. The Company owns the following three facilities. The Airguard High Efficiency Filter plant, located in Jeffersontown, Kentucky on a 7.5 acre tract of land, contains 100,000 square feet of manufacturing and office facilities. Airguard's ATI manufacturing and office facility in Ottawa, Kansas, contains 31,000 square feet. During fiscal 2000 Airguard purchased an existing 240,000 square foot manufacturing facility in Campbellsville, Kentucky. Production of air filtration products began in December 2000 at Campbellsville. Airguard administrative and sales offices and distribution facilities are located in leased facilities in Louisville, Kentucky; Cincinnati, Ohio; Toledo, Ohio; Nashville, Tennessee; Atlanta, Georgia; Columbus, 6 7 Ohio; Birmingham, Alabama; Portland, Oregon; Commerce City, Colorado; Kansas City, Missouri; Dallas, Texas; Corona, California and New Albany, Indiana. Airguard also leases facilities in Malaysia and Singapore. Facet owns manufacturing and distribution facilities in Tulsa, Oklahoma and La Coruna, Spain. The Tulsa facilities contain approximately 142,000 square feet on a 16 acre site. The La Coruna facility is on an approximately 17,000 square meter site and the building contains 5,700 square meters. Facet also leases facilities in Stillwell, Oklahoma; Tulsa, Oklahoma; Canada; Italy; Germany; France; United Kingdom and The Netherlands. Purolator owns a 228,500 square-foot manufacturing and office facility in Henderson, North Carolina on a site of approximately 25 acres. Purolator also leases sales, manufacturing and distribution facilities in Fresno, California; Hayward, California; La Mirada, California; Sacramento, California; Davenport, Iowa; Wichita, Kansas; Metuchen, New Jersey; Henderson, North Carolina; Kenly, North Carolina; Sparks, Nevada; Fairfax, Virginia and Auburn, Washington. Purolator Facet, Inc. ("PFI") owns a manufacturing and distribution facility in Greensboro, North Carolina. This facility contains approximately 88,000 square feet on a 21 acre site. PFI also leases facilities in Greensboro, North Carolina; Hebron, Connecticut and Middletown, Rhode Island. United Air Specialists ("UAS") has three owned facilities. The offices and primary manufacturing facility of UAS are located in Blue Ash, Ohio (a suburb of Cincinnati), on approximately 17 acres of land. This facility was built in 1978 and was expanded in 1991 and 1993 to a total of approximately 157,000 square feet. UAS also has sales offices and a manufacturing facility in Warwick, England which total approximately 13,200 square feet. In addition, UAS leases sales and service facilities in Bad Camberg, Germany; Phoenix, Arizona; Hayward, California; Anaheim, California; Louisville, Kentucky; Troy, Michigan; Jackson, Mississippi and Houston, Texas. Filter Products Inc. owns a 40,000 square foot manufacturing and office facility in Sacramento, California. Packaging. The following is a description of the principal properties utilized by the Company in conducting its Packaging business: The Company's J. L. Clark, Rockford, Illinois plant, located on 34 acres, consists of one-story manufacturing buildings, the first of which was constructed in 1910. Since then a number of major additions have been constructed and an injection molding plant was constructed in 1972. Approximately 450,000 square feet of floor area are devoted to manufacturing, warehouse and office use. Of the 34 acres, approximately 12 are vacant. A J. L. Clark plant is located in Lancaster, Pennsylvania on approximately 11 acres. It consists of a two-story office building containing approximately 7,500 square feet of floor space and a manufacturing plant and warehouse containing 236,000 square feet of floor space, most of which is on one level. These buildings were constructed between 1924 and 1964. J. L. Clark also leases a manufacturing facility in San Leandro, California. The various properties owned by the Company are considered by it to be in good repair and well maintained. Plant asset additions in 2001 are estimated at $25,000,000 for land, buildings, equipment and machinery, capacity additions and cost reduction projects. (ii) Function Engine/Mobile Filtration. Oil, air, fuel, hydraulic fluid and coolant filters are produced at the Baldwin and Hastings facilities in Kearney, and Gothenburg, Nebraska and Yankton, South Dakota. The various processes of pleating paper, winding cotton and synthetic fibers, placing the filter element in a metal or fiber container and painting the containers are highly mechanized, but require some manual assistance. The plants also maintain an inventory of special dies and molds for filter manufacture. 7 8 Oil, air and fuel filters, primarily for use in the railroad industry, are produced at Clark Filter in Lancaster, Pennsylvania. Industrial/Environmental Filtration. Air filters for the commercial, residential and industrial markets are produced in the Airguard and Purolator facilities. Dust collection systems, high efficiency electronic air cleaning systems and electrostatic precision spraying systems are designed and manufactured at the UAS facility in Cincinnati, Ohio. Specialty filter products for aviation, oil and gas drilling, military, marine and paper and chemical processes are manufactured and assembled at the PFI facilities in Greensboro, North Carolina. The manufacturing processes include bonding and sintering metal, tungsten inert gas and electron beam welding and diffusion-bonding of wire. Facet designs, manufactures and assembles filters and filtration systems for aircraft refueling, power generation, water treatment and general industrial applications at its United States and European facilities. The company also uses outside contractors for assembly and manufacturing of some of its products. Many of these products require special commercial or military technical approvals or product certification. Depth media filters for the pharmaceutical, biotech and food and beverage industries and other critical process filtration applications are manufactured at the Filter Products Inc. facility in Sacramento, California. Packaging. The Company's metal and combination metal and plastic packaging products are produced at J. L. Clark plants located in Rockford, Illinois, Lancaster, Pennsylvania, and San Leandro, California. The Rockford and Lancaster plants are completely integrated facilities which include creative and mechanical art departments and photographic facilities for color separation, preparation of multiple-design negatives and lithographing plates. Metal sheets are decorated on coating machines and lithographing presses connected with conveyor ovens. Decorated sheets are then cut to working sizes on shearing equipment, following which fabrication is completed by punch presses, can-forming and can-closing equipment and other specialized machinery for supplementary operations. Most tooling for fabricating equipment is designed and engineered by the Company's engineering staffs, and much of it is produced in the Company's tool rooms. During the fiscal year, J. L. Clark purchased, at a cost of approximately $7.5 million, new, state-of-the art metal lithography equipment. The new equipment is expected to be operational in the third quarter of fiscal 2001. Plastic packaging capabilities include printing and molding of irregular shaped plastic containers and customized plastic closures which have tamper-evidence as well as convenience features. ITEM 3. LEGAL PROCEEDINGS. The Company is involved in legal actions arising in the normal course of business. After taking into consideration legal counsel's evaluation of such actions, management is of the opinion that their outcome will not have a material adverse effect on the Company's consolidated results of operations or financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 8 9 ADDITIONAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
AGE AT YEAR ELECTED NAME 11/30/00 TO OFFICE ---- -------- ------------ Norman E. Johnson........................................... 52 2000 Chairman of the Board, President and Chief Executive Officer. Mr. Johnson has been employed by the Company since 1990. He was elected President-Baldwin Filters, Inc. in 1990, Vice President-CLARCOR in 1992, Group Vice President- Filtration Products Group in 1993, President and Chief Operating Officer in 1995 and Chairman, President and Chief Executive Officer in 2000. Mr. Johnson has been a Director of the Company since June 1996. William B. Walker........................................... 60 2000 President, Environmental Filtration. Mr. Walker has been employed by Airguard, a subsidiary of the Company since 1966. He was elected President of Airguard in 1994, Executive Vice President-Industrial/Environmental Filtration in 1999 and President, Environmental Filtration in 2000. Bruce A. Klein.............................................. 53 1995 Vice President-Finance and Chief Financial Officer. Mr. Klein was employed by the Company and elected Vice President-Finance and Chief Financial Officer on January 3, 1995. James M. Suchomel........................................... 50 2000 President, Process Filtration. Mr. Suchomel became an officer of the Company in February 2000. From March 1994 to February 2000, he was the Vice President and General Manager of the Process Water General Industry Group of United States Filter Corporation. David J. Anderson........................................... 62 1999 Vice President-Corporate Development. Mr. Anderson has been employed by the Company since 1990. He was elected Vice President Marketing & Business Development for the CLARCOR Filtration Products subsidiary in 1991, Vice President-Corporate Development in 1993, Vice President-International/Corporate Development in 1994 and Vice President-Corporate Development in 1999. David J. Lindsay............................................ 45 1995 Vice President-Administration and Chief Administrative Officer. Mr. Lindsay has been employed by the Company in various administrative positions since 1987. He was elected Vice President-Group Services in 1991, Vice President-Administration in 1994 and Vice President-Administration and Chief Administrative Officer in 1995. Peter F. Nangle............................................. 39 1999 Vice President-Information Services and Chief Information Officer. Mr. Nangle has been employed by the Company since 1993. He was elected Vice President-Information Services in 1994, Vice President-Information Services and Operations Analysis, Chief Information Officer in 1997 and Vice President-Information Services and Chief Information Officer in 1999. Marcia S. Blaylock.......................................... 44 2000 Vice President, Controller. Ms. Blaylock has been an employee of the Company since 1974. She was elected Assistant Secretary in 1994, Corporate Secretary in 1995, Vice President and Corporate Secretary in 1996, Vice President, Controller and Corporate Secretary in 1997 and Vice President, Controller in 2000. David J. Boyd............................................... 60 2000 Vice President, General Counsel and Corporate Secretary. Mr. Boyd became an officer of the Company in May 2000. Prior to that date he served as a partner in the law firm of Sidley & Austin since 1972.
9 10 Each executive officer of the Company is elected for a term of one year which begins at the Board of Directors Meeting at which he or she is elected, held at the time of the Annual Meeting of Shareholders, and ends on the date of the next Annual Meeting of Shareholders or upon the due election and qualification of his or her successor. 10 11 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS. The Company's Common Stock is listed on the New York Stock Exchange; it is traded under the symbol CLC. The following table sets forth the high and low market prices as quoted during the relevant periods on the New York Stock Exchange and dividends paid for each quarter of the last two fiscal years.
MARKET PRICE -------------------- QUARTER ENDED HIGH LOW DIVIDENDS ------------- ---- --- --------- February 26, 2000........................................... $19 1/2 $16 1/6 $.1150 May 27, 2000................................................ 19 3/4 17 .1150 August 26, 2000............................................. 21 3/8 17 3/8 .1150 December 2, 2000............................................ 21 7/16 16 15/16 .1175 ------ Total Dividends............................................. $.4625 ======
MARKET PRICE -------------------- QUARTER ENDED HIGH LOW DIVIDENDS ------------- ---- --- --------- February 27, 1999........................................... $20 13/16 $16 11/16 $.1125 May 29, 1999................................................ 19 1/4 16 7/16 .1125 August 28, 1999............................................. 21 3/8 18 1/8 .1125 November 27, 1999........................................... 18 9/16 14 1/4 .1150 ------ Total Dividends............................................. $.4525 ======
The approximate number of holders of record of the Company's Common Stock at February 1, 2001 is 1,600. In addition, the Company believes that there are approximately 6,000 beneficial owners whose shares are held in street names. ITEM 6. SELECTED FINANCIAL DATA. The information required hereunder is set forth on pages 26 and 27 of the Annual Report under the caption "11-Year Financial Review," is incorporated herein by reference and is filed as Exhibit 13(a)(ix) to this 2000 Form 10-K. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. The information required hereunder is set forth on pages 7 through 11 of the Annual Report under the caption "Financial Review," is incorporated herein by reference and is filed as Exhibit 13(a)(x) to this 2000 Form 10-K. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The information required hereunder is set forth on page 10 of the Annual Report under the caption "Financial Review -- Market Risk," is incorporated herein by reference and is filed as Exhibit 13(a)(x) to this 2000 Form 10-K. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The Consolidated Financial Statements, the Notes thereto and the report thereon of PricewaterhouseCoopers LLP, independent accountants, required hereunder with respect to the Company and its consolidated subsidiaries are set forth on pages 12 through 25, inclusive, of the Annual Report, are incorporated herein by reference and are filed as Exhibits 13(a)(ii) through 13(a)(vii) to this 2000 Form 10-K. 11 12 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Certain information required hereunder is set forth on pages 1 and 2 of the Company's Proxy Statement dated February 23, 2001 (the "Proxy Statement") for the Annual Meeting of Shareholders to be held on March 27, 2001 under the caption "Election of Directors -- Nominees for Election to the Board" and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The information required hereunder is set forth on pages 6 through 13 inclusive, of the Proxy Statement under the caption "Compensation of Executive Officers and Other Information" and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required hereunder is set forth on pages 4 and 5 of the Proxy Statement under the caption "Beneficial Ownership of the Company's Common Stock" and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required hereunder is set forth on page 4 of the Proxy Statement under the caption "Certain Relationships and Related Transactions" and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K. (a) Financial Statements The following financial information is incorporated herein by reference to the Company's Annual Report to Shareholders for the fiscal year ended November 30, 2000: *Consolidated Balance Sheets at November 30, 2000 and 1999 *Consolidated Statements of Earnings for the years ended November 30, 2000, 1999 and 1998 *Consolidated Statements of Shareholders' Equity for the years ended November 30, 2000, 1999 and 1998 *Consolidated Statements of Cash Flows for the years ended November 30, 2000, 1999 and 1998 *Notes to Consolidated Financial Statements *Report of Independent Accountants *Management's Report on Responsibility for Financial Reporting - ------------------------------ *Filed herewith as part of Exhibit 13(a) to this 2000 Form 10-K 12 13 The following items are set forth herein on the pages indicated: Report of Independent Accountants.......................................... F-1 Financial Statement Schedules: II. Valuation and Qualifying Accounts................................. F-2 Financial statements and schedules other than those listed above are omitted for the reason that they are not applicable, are not required, or the information is included in the financial statements or the footnotes therein. (b) None (c) Exhibits 3.1 The registrant's Second Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1998 (the "1998 10-K"). 3.1(a) Amendment to ARTICLE FOURTH of the Second Restated Certificate of Incorporation. Incorporated by reference to the Company's Proxy Statement dated February 18, 1999 for the Annual Meeting of Shareholders held on March 23, 1999. 3.2 The registrant's By-laws, as amended. Incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1995. 3.3 Certificate of Designation of Series B Junior Participating Preferred Stock of CLARCOR as filed with the Secretary of State of the State of Delaware on April 2, 1996. Incorporated by reference to Exhibit 4.5 to the Registration Statement on Form 8-A filed April 3, 1996. 4.1 Stockholder Rights Agreement dated as of March 28, 1996 between the registrant and the First Chicago Trust Company of New York. Incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K filed April 3, 1996. 4.1(a) First Amendment to Stockholders Rights Agreement dated as of March 23, 1999. Incorporated by reference to Exhibit 4 to the Company's Form 8-A/A filed March 29, 1999. 4.2 Certain instruments defining the rights of holders of long-term debt securities of CLARCOR and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. CLARCOR hereby agrees to furnish copies of these instruments to the SEC upon request. 4.2(a) Multicurrency Credit Agreement dated as of September 9, 1999. Incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K filed September 17, 1999. 10.1 The registrant's Deferred Compensation Plan for Directors. Incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1984 (the "1984 10-K"). 10.2 The registrant's Supplemental Retirement Plan. Incorporated by reference to Exhibit 10.2 to the 1984 10-K. 10.2(a) The registrant's 1994 Executive Retirement Plan. Incorporated by reference to Exhibit 10.2(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 3, 1994 ("1994 10-K"). 10.2(b) The registrant's 1994 Supplemental Pension Plan. Incorporated by reference to Exhibit 10.2(b) to the 1994 10-K. 10.2(c) The registrant's Supplemental Retirement Plan (as amended and restated effective December 1, 1994). Incorporated by reference to Exhibit 10.2(c) to the 1994 10-K. 10.3 The registrant's 1984 Stock Option Plan. Incorporated by reference to Exhibit A to the Company's Proxy Statement dated March 2, 1984 for the Annual Meeting of Shareholders held on March 31, 1984.
13 14 10.4 Employment Agreements with certain officers. Incorporated by reference to Exhibit 5 to the Company's Current Report on Form 8-K filed July 25, 1989. *10.4(a)(1) Form of Amended and Restated Employment Agreement with each of David J. Anderson, Marcia S. Blaylock, David J. Boyd, Bruce A. Klein, David J. Lindsay, Norman E. Johnson, Peter F. Nangle, James M. Suchomel and William B. Walker. 10.4(b) Employment Agreement with Lawrence E. Gloyd dated July 1, 1997. Incorporated by reference to Exhibit 10.4(b) to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1997 ("1997 10-K"). 10.4(c) Employment Agreement with Norman E. Johnson dated July 1, 1997. Incorporated by reference to Exhibit 10.4(c) to the 1997 10-K. *10.4(c)(1) Amended and Restated Employment Agreement with Norman E. Johnson dated as of December 17, 2000. 10.4(d) Trust Agreement dated December 1, 1997. Incorporated by reference to Exhibit 10.4(d) to the 1997 10-K. 10.4(e) Executive Benefit Trust Agreement dated December 22, 1997. Incorporated by reference to Exhibit 10.4(e) to the 1997 10-K. *10.5 The registrant's 1994 Incentive Plan (the "Plan") as amended through June 30, 2000. *10.5(a) Amendment to the Plan adopted December 18, 2000. *13 (a) The following items incorporated by reference herein from the Company's 2000 Annual Report to Shareholders ("2000 Annual Report"), are filed as Exhibits to this Annual Report Form 10-K:
(i) Business segment information for the fiscal years 1998 through 2000 set forth on pages 23 and 24 of the 2000 Annual Report (included in Exhibit 13(a)(vi) -- Note P of Notes to Consolidated Financial Statements); (ii) Consolidated Balance Sheets of the Company and its Subsidiaries at November 30, 2000 and 1999 set forth on page 12 of the 2000 Annual Report; (iii) Consolidated Statements of Earnings of the Company and its Subsidiaries for the years ended November 30, 2000, 1999 and 1998 set forth on page 13 of the 2000 Annual Report; (iv) Consolidated Statements of Shareholders' Equity for the Company and its Subsidiaries for the years ended November 30, 2000, 1999 and 1998 set forth on page 14 of the 2000 Annual Report; (v) Consolidated Statements of Cash Flows of the Company and its Subsidiaries for the years ended November 30, 2000, 1999 and 1998 set forth on page 15 of the 2000 Annual Report; (vi) Notes to Consolidated Financial Statements set forth on pages 16 through 24 of the 2000 Annual Report; (vii) Report of Independent Accountants set forth on page 25 of the 2000 Annual Report; (viii) Management's Report on Responsibility for Financial Reporting set forth on page 25 of the 2000 Annual Report; (ix) Information under the caption "11-Year Financial Review" set forth on pages 26 and 27 of the 2000 Annual Report; and (x) Management's Discussion and Analysis of Financial Condition and Results of Operation set forth under the caption "Financial Review" on pages 7 through 11 of the 2000 Annual Report.
*21 Subsidiaries of the Registrant. *23 Consent of Independent Accountants.
- --------------- * Filed herewith. 14 15 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: February 23, 2001 CLARCOR Inc. (Registrant) By: /s/ NORMAN E. JOHNSON -------------------------------------- Norman E. Johnson Chairman of the Board, President & Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: February 23, 2001 By: /s/ NORMAN E. JOHNSON ------------------------------------------------ Norman E. Johnson Chairman of the Board, President & Chief Executive Officer and Director Date: February 23, 2001 By: /s/ BRUCE A. KLEIN ------------------------------------------------ Bruce A. Klein Vice President -- Finance & Chief Financial Officer Date: February 23, 2001 By: /s/ MARCIA S. BLAYLOCK ------------------------------------------------ Marcia S. Blaylock Vice President, Controller & Chief Accounting Officer Date: February 23, 2001 By: /s/ J. MARC ADAM ------------------------------------------------ J. Marc Adam Director Date: February 23, 2001 By: /s/ MILTON R. BROWN ------------------------------------------------ Milton R. Brown Director Date: February 23, 2001 By: /s/ ROBERT J. BURGSTAHLER ------------------------------------------------ Robert J. Burgstahler Director Date: February 23, 2001 By: /s/ CARL J. DARGENE ------------------------------------------------ Carl J. Dargene Director
15 16 Date: February 23, 2001 By: /s/ LAWRENCE E. GLOYD ------------------------------------------------ Lawrence E. Gloyd Director Date: February 23, 2001 By: /s/ ROBERT H. JENKINS ------------------------------------------------ Robert H. Jenkins Director Date: February 23, 2001 By: /s/ PHILIP R. LOCHNER, JR. ------------------------------------------------ Philip R. Lochner, Jr. Director Date: February 23, 2001 By: /s/ JAMES L. PACKARD ------------------------------------------------ James L. Packard Director Date: February 23, 2001 By: /s/ STANTON K. SMITH, JR. ------------------------------------------------ Stanton K. Smith, Jr. Director
16 17 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Shareholders CLARCOR Inc. Rockford, Illinois Our audits of the consolidated financial statements referred to in our report dated January 8, 2001 appearing on page 25 in the 2000 Annual Report to Shareholders of CLARCOR Inc. and Subsidiaries (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a) of this Form 10-K (page 13, index of exhibits). In our opinion, the financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PricewaterhouseCoopers LLP Chicago, Illinois January 8, 2001 F-1 18 CLARCOR INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED NOVEMBER 30, 2000, 1999 AND 1998 (DOLLARS IN THOUSANDS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - -------------------------------------------- ---------- ----------------------- ---------- ---------- ADDITIONS ----------------------- (1) (2) BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD - -------------------------------------------- ---------- ---------- ---------- ---------- ---------- 2000: Allowance for losses on accounts receivable................................ $5,155 $1,167 $ 17(A) $1,312(B) $5,027 ====== ====== ====== ====== ====== 1999: Allowance for losses on accounts receivable................................ $2,711 $ 975 $2,255(A) $ 786(B) $5,155 ====== ====== ====== ====== ====== 1998: Allowance for losses on accounts receivable................................ $2,106 $3,075 $ 46(A) $2,516(B) $2,711 ====== ====== ====== ====== ======
NOTES: (A) Due to business acquisitions. (B) Bad debts written off during year, net of recoveries. F-2 EX-10.4(A)(1) 2 c59555ex10-4a1.txt FORM OF EMPLOYMENT AGREEMENT 1 EXHIBIT 10.4(a)(1) AMENDED AND RESTATED EMPLOYMENT AGREEMENT This AMENDED AND RESTATED EMPLOYMENT AGREEMENT by and between CLARCOR Inc., a Delaware corporation (the "Corporation"), and ______________ ____________________ (the "Executive") is dated as of December 17, 2000. W I T N E S S E T H WHEREAS, the Executive currently serves as ___________________________ of the Corporation and is entitled to certain benefits in the event of a Change of Control (as defined below) upon the terms and conditions set forth in the Employment Agreement between the Corporation and the Executive dated as of ______________ (the "Amended Agreement"); and WHEREAS, the Executive and the Corporation desire to amend and restate the Original Agreement as hereinafter provided to clarify certain terms and conditions of Executive's employment with the Corporation. NOW, THEREFORE, it is mutually agreed as follows: Factual Background The Corporation wishes to attract and retain well-qualified executive and key personnel and to assure both itself and the Executive of continuity of management in the event of any actual or threatened Change of Control (as defined in Section 2) of the Corporation. To achieve this purpose, the Compensation Committee of the Board of Directors of the Corporation has considered and recommends that agreements should be entered into with such personnel, and in accordance with that recommendation, the Board of Directors (the "Board") has approved this Agreement as being in the best interests of the Corporation and its stockholders. 1. Operation of Agreement. The "Effective Date of this Agreement" shall be the date on which a Change of Control occurs. 2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition (other than from the Corporation) by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 15% or more of either the then outstanding shares of common stock or the combined voting power of the Corporation's then outstanding voting securities entitled to vote generally in the election of directors; provided, however, no Change of Control shall be deemed to have occurred for any acquisition by any corporation with respect to which, following such acquisition, more than 60% of the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals or entities who were the beneficial owners, respectively, of 2 the then outstanding shares of common stock or the combined voting power of the Corporation's then outstanding voting securities immediately prior to such acquisition in substantially the same proportions as their ownership, immediately prior to such acquisition, of the Corporation's then outstanding common stock and then outstanding voting securities, as the case may be; (b) Individuals who, as of the date hereof, constitute the Board (as of the date hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (c) Consummation of a reorganization, merger or consolidation, in each case, with respect to which persons who were the stockholders of the Corporation immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 60% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated corporation's then outstanding voting securities, or (d) Approval by the stockholders of the Corporation of a liquidation or dissolution of the Corporation or of the sale of all or substantially all of the assets of the Corporation. 3. Employment. The Corporation hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Corporation, for the period commencing on the Effective Date of this Agreement and ending on the earlier to occur of the third anniversary of such date or the Executive's normal retirement date under the Corporation's retirement plans (the "Employment Period"), to exercise such authority and perform such executive duties as are commensurate with the authority being exercised and duties being performed by the Executive during the 90-day period immediately prior to the Effective Date of this Agreement, which services shall be performed at the location where the Executive was employed immediately prior to the Effective Date of this Agreement. During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Corporation and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Corporation in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date of this Agreement, the continued conduct of such -2- 3 activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date of this Agreement shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Corporation. 4. Compensation, Compensation Plans, Benefits and Perquisites. During the Employment Period, the Executive shall be compensated as follows: (a) Executive shall receive an annual salary at a monthly rate at least equal to the highest monthly base salary paid or payable to the Executive by the Corporation during the 36 calendar months immediately prior to the Effective Date of this Agreement, with the opportunity for increases, from time to time thereafter, which are in accordance with the Corporation's regular practices. Annual salary shall not be reduced after any such increase, and the term "salary" as utilized in this Agreement shall refer to such annual salary as increased. (b) Executive shall be eligible to participate on a reasonable basis in the Corporation's 1994 Incentive Plan, Key Management Incentive Plan and other bonus and incentive compensation plans (whether now or hereinafter in effect) which provide opportunities to receive compensation which are the greater of (i) the opportunities provided by the Corporation for executives with comparable duties or (ii) the opportunities under any such plans in which he was participating during the 90-day period immediately prior to the Effective Date of this Agreement. (c) Executive shall be entitled to receive employee benefits and perquisites which are the greater of (i) the employee benefits and perquisites provided by the Corporation to executives with comparable duties or (ii) the employee benefits and perquisites to which he was entitled during the 90-day period immediately prior to the Effective Date of this Agreement. Such benefits and perquisites shall include, but not be limited to, the benefits and perquisites included under the following: CLARCOR Inc. Pension Plan Retirement Savings Plan and Trust (401(k) Plan) Supplemental Retirement Plan Executive Retirement Plan Monthly Investment Plan Dental Plan Health Care Plan Life Insurance Plan/Supplemental Life Insurance Plan Disability Plan Automobile Plan 5. Termination. (a) The term "Termination" shall mean termination by the Corporation of the employment of the Executive with the Corporation for any reason other than death, Disability or Cause (as defined below), or resignation of the Executive upon the occurrence of any of the following events: -3- 4 (i) A material adverse reduction in the nature or scope of the Executive's authority, duties or responsibilities from those referred to in Section 3, as determined in good faith by the Executive; (ii) A relocation of more than 35 miles from (A) the Executive's workplace, or (B) the principal offices of the Corporation (if such offices are the Executive's workplace), in each case without the consent of the Executive; (iii) A reduction in total compensation, compensation plans, benefits or perquisites from those provided in Section 4, or the breach by the Corporation of any other provision of this Agreement; (iv) The failure of any successor to the Corporation to assume this Agreement or a material breach of the Agreement by the Corporation or its successors; or (v) A good-faith determination by the Executive that as a result of a Change of Control and a change in circumstances thereafter significantly affecting his position, he is unable to exercise the authorities, powers, function or duties attached to his position and contemplated by Section 3 of the Agreement. (b) Notwithstanding anything in this Agreement to the contrary, if the Executive's employment is terminated prior to a Change of Control, and Executive reasonably demonstrates that such termination was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change of Control and who effectuates a Change of Control, then for all purposes of this Agreement, a Termination shall be deemed to have occurred, and the date of the Change of Control shall be deemed to mean the date immediately prior to the date of such termination of employment. (c) For purposes of this Section 5, any good-faith determination made by the Executive shall be conclusive. (d) The term "Cause" means fraud, misappropriation or intentional material damage to the property or business of the Corporation or commission of a felony. (e) For purposes of this Agreement, Executive shall be deemed to have a "Disability" (and to be "Disabled") if he has been determined by the Incumbent Board (as defined in Section 2(b)) based on competent medical evidence, to have a physical or mental disability that renders him incapable, after reasonable accommodation by the Corporation, of performing his duties under this Agreement. 6. Termination Payments. (a) In the event of a Termination of Executive during the Employment Period and subject to the provisions of Section 7 of this Agreement, the Corporation shall pay to the Executive and provide him with the following (the "Termination Payments"); -4- 5 (i) A lump-sum cash payment equal to three (3) times the sum of (A) the Executive's Base Salary (as defined below) plus (B) the Executive's Annual Bonus (as defined below); (ii) A pro-rata share of the Annual Bonus (as defined below), based on the number of days worked in the bonus period during the year in which employment terminates; (iii) Continued health and welfare benefits and perquisites for the three (3) year period following the Termination; and (iv) A lump-sum cash payment equal to the present value of the Additional Pension Benefits (as defined below) the Executive would have received had the Executive remained employed by the Corporation for an additional three (3) years. (b) For purposes of this Agreement, the following terms shall be defined as follows: (i) "Base Salary" shall mean the amount in effect under paragraph 4(a) immediately prior to the date of Termination; (ii) "Annual Bonus" shall mean the greater of (i) the Executive's target bonus for the year of Termination, or (ii) Executive's highest annual bonus received (determined without regard to any deferral thereof) during the three year period prior to the Termination; and (iii) "Additional Pension Benefits" shall mean a lump-sum cash amount equal to the present value of the excess of (1) the actuarial equivalent of the benefit under the Corporation's Retirement Program if the Executive had continued to be employed and to be entitled to age and service credit for eligibility and benefit purposes during the 36-month period immediately following such termination (utilizing actuarial assumptions no less favorable to the Executive than those in effect under the Corporation's Retirement Program immediately prior to the date of termination), over (2) the aggregate benefit actually payable under the Retirement Program and any successor retirement program of the Corporation. For purposes of such calculation, the following assumptions shall apply: (1) that the Executive would continue to be compensated during the 36-month period following termination at an annual rate of compensation equal to that used to calculate the payments provided by paragraph 6(a)(i) above; (2) that the Executive is fully vested in the benefit payable under the Retirement Program; and (3) that the aggregate benefit that would have been paid under the Retirement Program is as of either the normal or early retirement date for which the Executive would have qualified, if the Executive were still employed on that date, whichever would produce the highest present value amount payable under this paragraph. Notwithstanding the foregoing, "Additional Pension Benefits" shall be reduced by the present value of the incremental benefit payable under the Corporation's Executive Retirement Plan by reason of an involuntary termination following a change in control. -5- 6 (iv) "Retirement Program" shall include the Corporation's Pension Plan, Supplemental Pension Plan and Executive Retirement Plan. (c) In the event of Termination of the Executive during the Employment Period, all options and restricted stock granted to the Executive outstanding immediately prior to the Termination shall, to the extent not then vested, fully vest. All such stock options become exercisable as of the date of the Termination, and Executive shall have the right to exercise any such stock option until the earlier to occur of (i) one (1) year from the date of Termination and (ii) the expiration date of such stock option as set forth in the agreement evidencing such option. (d) If benefits or service credits or the right to accrue further benefits or service credits under any plan referred to in Section 4(b) or (c) shall not be payable or provided under such plan to the Executive, or his dependents, beneficiaries and estate because he is no longer an employee of the Corporation, the Corporation itself shall, to the extent necessary, pay or provide for payment of such benefits and service credits for such benefits to the Executive, his dependents, beneficiaries and estate. (e) The Termination Payments payable under this Agreement shall be in lieu of and subject to offset for any termination, severance or similar payments and benefits provided under any employment agreement or severance plan or policy of the Corporation to which the Executive may be a party or under which he may be covered. (f) The Corporation shall provide the Executive the opportunity to defer the receipt of any amounts payable under Section 6(a) hereunder (plus any other relevant sections) and under the Corporation's supplemental retirement plans to such date or dates as are reasonably chosen by the Executive pursuant to an election to so defer made by the Executive no later than 90 days prior to the date such payments would otherwise be due. Such deferred amounts shall appreciate at an annual rate equal to the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). 7. Non-Competition; Non-Solicitation; and Confidentiality. The Executive agrees that: (a) There shall be no obligation on the part of the Corporation to provide any further payments or benefits (other than benefits or payments already earned, accrued or paid) described in Section 6 if, (i) during the Employment Period, the Executive shall be employed by or otherwise engaged or be interested (other than as a passive investor in a publicly-owned entity) in any business which directly competes with any business of the Corporation or of any of its subsidiaries at such time and (ii) such employment or activity is likely to cause, or causes, serious damage to the Corporation or any of its subsidiaries at such time; (b) Executive covenants and agrees that during the Employment Period, Executive shall not (i) directly or indirectly solicit or encourage any person to leave his/her employment with the Corporation or assist in any way with the hiring of any employee of the Corporation by any other business; and/or (ii) solicit business from, or sell to, any of the Corporation's clients or customers or any other person, firm or corporation to whom the -6- 7 Corporation has sold products or services where such solicitation or sale would involve the sale of products or services competitive with those sold by the Corporation; (c) During and after the Employment Period, he shall retain in confidence any confidential information known to him concerning the Corporation and its subsidiaries and their respective businesses. The term confidential information does not include information that (i) is or becomes generally available to the public other than as a result of a disclosure by the Executive; (ii) was readily available to the Executive on a nonconfidential basis prior to its disclosure to the Executive by the Corporation; (iii) was already lawfully in the Executive's possession as evidenced by records kept in the ordinary course of business or by proof of actual prior possession; or (iv) becomes available to the Executive on a nonconfidential basis from a source other than the Corporation provided that such source is not known by the Executive to be bound by a confidentiality agreement or obligation with the Corporation or one of its representatives. Notwithstanding the foregoing, a breach by the Executive of this Section 7(c) shall not be used to set-off or delay amounts payable under this Agreement; and (d) Executive acknowledges and agrees that irreparable harm would result from any breach or threatened breach by Executive of the provisions of this Agreement, and monetary damages alone would not provide adequate relief for any such breach. Accordingly, if Executive breaches this Agreement, injunctive relief in favor of the Corporation is proper without the necessity of the Corporation posting bond. Moreover, any award of injunctive relief shall not preclude the Corporation from seeking or recovering any lawful compensatory damages which may have resulted from a breach of this Agreement, including a forfeiture of any payments not made and a return of any payments already received. 8. No Obligation to Mitigate Damages. The Executive shall not be obligated to seek other employment in mitigation of amounts payable or arrangements made under the provisions of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Corporation's obligations under this Agreement. 9. Certain Additional Payments by the Corporation. The Corporation agrees that: (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Corporation to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") is an excess parachute payment which would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. Notwithstanding the foregoing or other provisions of this Section 9, in the event that the amount of parachute payments paid or payable to Executive do not exceed Executive's -7- 8 safe harbor (determined pursuant to Section 280G of the Code) by at least ten percent (10%), then the additional payment described in this Section 9 shall not be paid and the termination payments payable to Executive hereunder shall be reduced such that no amounts paid or payable to Executive hereunder shall be deemed to constitute parachute payments subject to excise tax under Section 4999 of the Code. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment or a reduction in the termination payments is required and the amount of such Gross-Up Payment or reduction and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized accounting firm (the "Accounting Firm") which shall provide detailed supporting calculations both to the Corporation and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Corporation. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Corporation to the Executive within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive (whether or not as a result of a reduction in the termination payments), it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty, which opinion shall also include a detailed calculation of any reduction in the termination payments. Any determination by the Accounting Firm shall be binding upon the Corporation and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Corporation should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Corporation exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred, and any such Underpayment shall be promptly paid by the Corporation to or for the benefit of the Executive. (c) The Executive shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Corporation of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Corporation of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Corporation (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Corporation notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: -8- 9 (i) give the Corporation any information reasonably requested by the Corporation relating to such claim, (ii) take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation, (iii) cooperate with the Corporation in good faith in order effectively to contest such claim, and (iv) permit the Corporation to participate in any proceedings relating to such claim; provided, however, that the Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Corporation shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; provided, however, that if the Corporation directs the Executive to pay such claim and sue for a refund, the Corporation shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Corporation's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Corporation pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Corporation's complying with the requirements of Section 9(c)) promptly pay to the Corporation the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Corporation pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Corporation does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance -9- 10 shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Full Settlement. The Corporation's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Corporation may have against the Executive or others. The Corporation agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Corporation, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code. 11. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the Executive at _________________, _________ or at the last address he has filed in writing with the Corporation or, in the case of the Corporation, at its principal executive offices. 12. Non-Alienation. The Executive shall not have any right to pledge, hypothecate, anticipate or in any way create a lien upon any amounts provided under this Agreement; and no benefits payable hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts, or by operation of law, except by will or the laws of descent and distribution. 13. Governing Law. The provisions of this Agreement shall be construed in accordance with the laws of the State of Illinois without regard to any conflict of laws provision thereof. 14. Amendment. This Agreement may be amended or canceled by mutual agreement of the parties in writing without the consent of any other person, and, so long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof. 15. Arbitration. Any dispute or controversy between the Corporation and the Executive, whether arising out of or relating to this Agreement, the breach of this Agreement, or otherwise, shall be settled by arbitration administered in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") then in effect, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction. Any arbitration shall be held before a single arbitrator who shall be selected by the mutual agreement of the Corporation and the Executive, unless the parties are unable to agree to an arbitrator, in which case, the arbitrator will be selected by the then President of the Chicago Bar Association. The arbitrator shall have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant, including, without limitation, the issuance of an injunction. However, either party may, without inconsistency with this arbitration provision, apply to any court having jurisdiction over such dispute or controversy and seek interim provisional, -10- 11 injunctive or other equitable relief until the arbitration award is rendered or the controversy is otherwise resolved. Except as necessary in court proceedings to enforce this arbitration provision or an award rendered hereunder, or to obtain interim relief, or as required by law, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of the Corporation and the Executive. The Corporation and the Executive acknowledge that this Agreement evidences a transaction involving interstate commerce. Notwithstanding any choice of law provision included in this Agreement the United States Federal Arbitration Act shall govern the interpretation and enforcement of this arbitration provision. The arbitration proceeding shall be conducted in Chicago, Illinois or such other location to which the parties may agree. The Corporation shall pay the costs of any arbitrator appointed hereunder. 16. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Corporation shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Corporation and its successors and assigns. (c) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. As used in this Agreement, "Corporation" shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. Any failure by the Corporation to comply with and satisfy this Section 16(c) shall constitute a Termination as provided in Section 5 of this Agreement, provided that such successor has received at least ten days' prior written notice from the Corporation or the Executive of the requirements of this Section 16(c). 17. Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. 18. "At Will." The Executive and the Corporation acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Corporation, the employment of the Executive by the Corporation is "at will" and, prior to the Effective Date of this Agreement and except as otherwise provided herein, may be terminated by either the Executive or the Corporation at any time. Moreover, except as provided in Section 5(b) above, if prior to the Effective Date of this Agreement, (i) the Executive's employment with the Corporation terminates or (ii) the Executive ceases to be an officer of the Corporation, then the Executive shall have no further rights under this Agreement. -11- 12 [SIGNATURE PAGE FOLLOWS] -12- 13 IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Corporation has caused these presents to be executed in its name on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary, all as of the day and year first above written. ____________________________________________ Name: Title: CLARCOR Inc. By: ----------------------------------------- Name: Title: ATTEST: - ------------------------------ Secretary (Seal) -13- EX-10.4(C)(1) 3 c59555ex10-4c1.txt AMENDED EMPLOYMENT AGREEMENT 1 EXHIBIT 10.4(c)(1) AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement by and between CLARCOR Inc., a Delaware corporation (the "Corporation"), and Norman Johnson (the "Executive") is dated as of December 17, 2000 (this "Agreement"). W I T N E S S E T H WHEREAS, the Executive currently serves as the Chairman of the Board of Directors, President and Chief Executive Officer of the Corporation pursuant to an Amended and Restated Employment Agreement dated as of March 25, 2000 (the "Amended Agreement"); and WHEREAS, the Executive and the Corporation desire to amend and restate the Amended Agreement as hereinafter provided to clarify certain terms and conditions of Executive's employment by the Corporation as its Chairman of the Board, President and Chief Executive Officer. NOW, THEREFORE, It is mutually agreed as follows: 1. Employment. (a) The Corporation agrees to employ Executive as Chairman of the Board, President and Chief Executive Officer and Executive agrees to serve the Corporation in such capacities, upon the terms and conditions and for the period of employment hereinafter set forth. Throughout the Employment Period (as defined below), subject to the supervision of the Board of Directors (the "Board"), Executive shall exercise such authority and perform such duties as are commensurate with the authority exercised and the duties performed by the Corporation's previous Chairman of the Board and Chief Executive Officer immediately preceding the Effective Date (as defined below) of this Agreement. Executive shall provide such services at the headquarters of the Corporation in Rockford, Illinois, except as otherwise expressly provided herein. Throughout the Employment Period, unless otherwise agreed in writing by Executive and the Corporation, the Corporation shall neither demote Executive nor assign to Executive any duties or responsibilities that are inconsistent with his position, duties, responsibilities and status as Chairman of the Board, President and Chief Executive Officer. (b) During the Employment Period, and excluding any periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Corporation and, to the extent necessary to discharge the responsibilities assigned to Executive hereunder, to use Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for Executive to (i) serve on corporate, civic or charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions and (iii) manage personal investments, so long as such activities do not significantly interfere with the performance of Executive's responsibilities as an employee of the Corporation in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by Executive prior to the Effective Date of this Agreement, the continued conduct of such 2 activities (or conduct of activities similar in nature and scope thereto) subsequent to the Effective Date of this Agreement shall not thereafter be deemed to interfere with the performance of Executive's responsibilities to the Corporation. 2. Employment Period. The term of Executive's employment under this Agreement shall commence as of the date of the Amended Agreement (the "Effective Date"), and shall expire, subject to earlier termination of employment as hereinafter provided, upon the occurrence of the annual meeting of the Board held in March, 2003; provided, however, that unless the Board shall take affirmative action to the contrary and the Corporation shall give prior written notice thereof to Executive, as of the first day of the Corporation's 2001 fiscal year, and as of the first day of each succeeding fiscal year of the Corporation, the term of this Agreement shall be extended automatically (for a period of approximately one additional year) to the date of the annual meeting of the Board held in March 2004, and each year thereafter (the "Employment Period"). 3. Compensation, Compensation Plans, Benefits and Perquisites. During the Employment Period, Executive shall be compensated as follows: (a) Effective as of October 1, 2000, he shall receive an annual salary equal to $440,000, payable in equal monthly installments, with the opportunity for increases, from time to time thereafter, in the discretion of the Compensation and Stock Option Committee of the Board (the "Committee") in accordance with the Corporation's regular practices. The initial review of Executive's annual salary shall occur on October 1, 2001. Subsequent annual reviews will be completed by October 1 of each subsequent year. In each case, the Executive's salary range shall be based on salary ranges established by national compensation studies of companies with revenues comparable to the Corporation. The term "salary" as utilized in this Agreement shall refer to such annual salary as increased. (b) Executive shall be eligible to participate on a basis commensurate with his position as Chief Executive Officer of the Corporation as determined by the Committee in the Corporation's 1994 Incentive Plan, Key Management Incentive Plan and other bonus and incentive compensation plans (whether now or hereinafter in effect). Options granted by the Committee shall contain the provisions commonly contained in executive options awarded by the Corporation, including an exercise price equal to the fair market value of the Corporation's common stock on the date of grant. In the event of a Change of Control (as defined in the Employment Agreement between the Executive and the Corporation dated as of December 17, 2000 (the "CIC Agreement")) all options and restricted stock shall become fully vested, and any options or restricted stock to which Executive has become entitled pursuant to this provision but which have not yet been granted by the occurrence of the Change of Control, shall be granted immediately and shall be fully vested. Except as set forth in the CIC Agreement, no additional compensation provided under any of such plans shall be deemed to modify or otherwise affect the terms of this Agreement or any of Executive's entitlements hereunder. (c) Executive shall be entitled to participate in all employee benefit plans, practices and programs maintained by the Corporation and made available to employees generally, including, without limitation, all pension, retirement, savings, medical, hospitalization, disability, dental, life, or travel accident insurance benefit plans (collectively the "Benefit -2- 3 Plans"). Executive's participation in such Benefit Plans shall be on the same basis and terms as are applicable to employees of the Corporation generally. Such Benefit Plans shall include, but shall not be limited to, the following: CLARCOR Inc. Pension Plan Retirement Savings Plan and Trust (401(k) Plan) Supplemental Retirement Plan Monthly Investment Plan Dental Plan Health Care Plan Life Insurance Plan/Supplemental Life Insurance Plan Disability Plan Executive Retirement Plan (d) Executive shall be entitled to paid vacations in accordance with the Corporation's vacation policy as in effect from time to time and to all paid holidays given by the Corporation to its executive officers. (e) Executive shall be entitled to all fringe benefits and perquisites made available by the Corporation to its executive officers, including, but not limited to, participation in the Automobile Plan. (f) In addition to the amounts of compensation provided elsewhere in this Agreement, if during the Employment Period the Corporation shall achieve both (i) quarterly revenues of at least $250,000,000 and (ii) net profits after tax equal to 7.5% of sales (both as reported on any of the Corporation's regular quarterly earnings statements prepared in accordance with Generally Accepted Accounting Principles consistently applied), the Committee shall perform a special review of Executive's compensation and shall pay to Executive a lump sum in such amount, if any, as it may determine in good faith to be equitable. Further, in such circumstance the Committee may, if it so determines, award to Executive an additional grant of options under the 1994 Incentive Plan in such amount, if any, as it may determine in good faith to be equitable. Any payment or grants of options under this Section 3(f) may be made at any time within the Employment Period. 4. Termination. Executive's employment with the Corporation may be terminated by the Corporation or Executive only under the circumstances described in this Section 4: (a) Executive may voluntarily terminate his employment hereunder, but only upon giving at least six months' prior written notice to the Board, in which case the Employment Period shall terminate on the effective date of such notice; provided, however, that the Board shall have the ability, in its sole discretion, to waive the six month notice requirement. (b) Executive's employment hereunder will terminate upon his death. (c) If Executive becomes Disabled, the Corporation may terminate Executive's employment with the Corporation. For purposes of the Agreement, Executive shall be deemed to have a "Disability" (and to be "Disabled") if he has been determined by the -3- 4 Incumbent Board (as defined in the CIC Agreement), based on competent medical evidence, to have a physical or mental disability that renders him incapable, after reasonable accommodation by the Corporation, of performing his duties under this Agreement. (d) The Corporation may terminate Executive's employment hereunder at any time for Cause. For purposes of this Agreement, the term "Cause" shall mean fraud, misappropriation or intentional material damage to the property or business of the Corporation or commission of a felony. (e) Executive may resign at any time for Good Reason. For purposes of this Agreement, "Good Reason" shall mean (i) a material adverse reduction in the nature or scope of Executive's authority, duties or responsibilities from those referred to in Section 1(a), as determined in good faith by Executive, (ii) a relocation of more than 35 miles from (A) Executive's workplace, or (B) the principal offices of the Corporation (if such offices are Executive's workplace), in each case without the consent of Executive, (iii) a reduction in total compensation, compensation plans, benefits or perquisites from those provided in Section 3, or (iv) the breach by the Corporation of any other provision of this Agreement, Board action to prevent the automatic extension of this Agreement as provided in Section 2 hereof, or a determination by Executive that as a result of a Change of Control (as defined in the CIC Agreement) and a change in circumstances thereafter significantly affecting his position, he is unable to exercise the authorities, powers, function or duties attached to his position and contemplated by Section 1(a) of this Agreement. For purposes of this Section 4 a reasonable determination made by Executive in good faith shall be conclusive. 5. Termination Payments. In the event of a termination of Executive's employment with the Corporation and subject to the provisions of Section 4 of this Agreement, the Corporation shall pay to Executive and provide him with the following: (a) If Executive's termination occurs due to death or Disability, Executive (or his estate or beneficiaries, if applicable) shall be entitled to any unpaid salary for days worked prior to his date of termination and payment for unused vacation days (determined in accordance with the policies of the Corporation as in effect at that time for officers of the Corporation) earned prior to the date of termination, and to all other benefits available to Executive or his estate and beneficiaries under the Corporation's Benefit Plans as in effect on the date of such termination of employment. (b) If Executive's employment is terminated by the Corporation without Cause or if Executive resigns for Good Reason, Executive shall be entitled to the following: (i) The Corporation shall pay to Executive the lump sum of three times the sum of Executive's Base Salary plus Annual Bonus. Base Salary shall mean the amount of the salary in effect under Section 3(a) immediately prior to the date of such termination of employment, and Annual Bonus shall mean the greater of (i) Executive's target bonus for the Year of Termination, or (ii) Executive's highest annual bonus received (determined without regard to any deferral thereof) during the three year period prior to the Termination. Further, Executive shall become fully vested in any stock options and in any restricted stock in which Executive had not yet become vested. -4- 5 (ii) During the remainder of the Employment Period, Executive shall continue to be treated as an employee under the provisions of the Corporation's plans referred to in Section 3(b). In addition, Executive shall continue to be entitled to all benefits and service credits for benefits, programs and arrangements of the Corporation described in Sections 3(c) and (e) as if he were still employed during such period under this Agreement. (iii) If, despite the provisions of subparagraph (ii) above, benefits or service credits or the right to accrue further benefits or service credits under any plan referred to in Section 3(b) or (c) shall not be payable or provided under such plan to Executive, or his dependents, beneficiaries and estate because he is no longer an employee of the Corporation, the Corporation itself shall, to the extent necessary, pay or provide for payment of such benefits and service credits for such benefits to Executive, his dependents, beneficiaries and estate. (c) The amount of payments provided for in Section 5(b) shall be determined by the Accounting Firm (as defined in Section 9) and such payments shall be made within 30 days after Executive's termination of employment with the Corporation. 6. Non-Competition; Non-Solicitation; and Confidentiality. Executive agrees that: (a) There shall be no obligation on the part of the Corporation to provide any further payments or benefits (other than benefits or payments already earned, accrued or paid) described in Section 5 or Section 8 if, during the Employment Period, Executive shall be employed by (or become an owner, director or officer of, or a consultant to) any business which directly competes with any business of the Corporation or of any of its subsidiaries at such time; provided, however, that Executive shall not be deemed to have breached this undertaking if his sole relationship with such entity consists of his holding, directly or indirectly, an equity interest in such entity not greater than five percent of such entity's outstanding equity interest; (b) Executive covenants and agrees that during the Employment Period, Executive shall not (i) directly or indirectly solicit or encourage any person to leave his/her employment with the Corporation or assist in any way with the hiring of any employee of the Corporation by any other business; and/or (ii) solicit business from, or sell to, any of the Corporation's clients or customers or any other person, firm or corporation to whom the Corporation has sold products or services where such solicitation or sale would involve the sale of products or services competitive with those sold by the Corporation; (c) During and after the Employment Period, he shall retain in confidence any confidential information known to him concerning the Corporation and its subsidiaries and their respective businesses. The term confidential information does not include information that (i) is or becomes generally available to the public other than as a result of a disclosure by the Executive; (ii) was readily available to the Executive on a nonconfidential basis prior to its disclosure to the Executive by the Corporation; (iii) was already lawfully in the Executive's possession as evidenced by records kept in the ordinary course of business or by proof of actual prior possession; or (iv) becomes available to the Executive on a nonconfidential basis from a source other than the Corporation provided that such source is not known by the Executive to be -5- 6 bound by a confidentiality agreement or obligation with the Corporation or one of its representatives. Notwithstanding the foregoing, a breach by Executive of this Section 6(c) shall not be used to set-off or delay amounts payable under this Agreement; and (d) Executive acknowledges and agrees that irreparable harm would result from any breach or threatened breach by Executive of the provisions of this Agreement, and monetary damages alone would not provide adequate relief for any such breach. Accordingly, if Executive breaches this Agreement, injunctive relief in favor of the Corporation is proper without the necessity of the Corporation posting bond. Moreover, any award of injunctive relief shall not preclude the Corporation from seeking or recovering any lawful compensatory damages which may have resulted from a breach of this Agreement, including a forfeiture of any payments not made and a return of any payments already received. 7. No Obligation to Mitigate Damages. Executive shall not be obligated to seek other employment in mitigating of amounts payable or arrangements made under the provisions of this Agreement and the obtaining of such other employment shall in no event effect any reduction of the Corporation's obligations under this Agreement. 8. Termination of Executive Following a Change of Control. In the event the Executive's employment with the Corporation is terminated during the Employment Period pursuant to or following a Change of Control (as defined in the CIC Agreement), Executive shall be entitled to the salary, compensation and benefits provided to him under the CIC Agreement in lieu of any termination payments described in Section 5 hereof. 9. Certain Additional Payments by the Corporation. The Corporation agrees that: (a) In the event it shall be determined that any payment or distribution by the Corporation to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") is an excess parachute payment which would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, and hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including, without limitation, any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. Notwithstanding the foregoing or other provisions of this Section 9, in the event that the amount of parachute payments paid or payable to Executive do not exceed Executive's safe harbor (determined pursuant to Section 280G of the Code) by at least ten percent (10%), then the additional payment described in this Section 9 shall not be paid and the termination payments payable to Executive hereunder shall be reduced such that no amounts paid or payable to Executive hereunder shall be deemed to constitute parachute payments subject to excise tax under Section 4999 of the Code. -6- 7 (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment or a reduction in the termination payments is required and the amount of such Gross-Up Payment or reduction and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized accounting firm (the "Accounting Firm") which shall provide detailed supporting calculations both to the Corporation and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Corporation. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Corporation to Executive within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by Executive (whether or not as a result of a reduction in the termination payments), it shall furnish Executive with a written opinion that failure to report the Excise Tax on Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty, which opinion shall also include a detailed calculation of any reduction in the termination payments. Any determination by the Accounting Firm shall be binding upon the Corporation and Executive. As a result of the uncertainty in the application of Sections 4999 and 280G of the Code, it is possible that a Gross-Up Payment (or a portion thereof) will be paid which should not have been paid (an "Overpayment") or a Gross-Up Payment (or a portion thereof) which should have been paid by the Corporation will not have been paid (an "Underpayment"). (c) An Underpayment shall be deemed to occur upon a claim by the Internal Revenue Service that the tax liability of Executive (whether in respect of the then current taxable year of Executive or in respect of any prior taxable year of Executive) may be increased by reason of the imposition of the Excise Tax on a Payment or Payments with respect to which the Corporation has failed to make a sufficient Gross-Up Payment. In the event that the Corporation exhausts its remedies pursuant to this Section 9(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Corporation to or for the benefit of Executive. Executive shall notify the Corporation in writing of any claim by the Internal Revenue Service. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Corporation of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which he gives such notice to the Corporation (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Corporation notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give the Corporation any information reasonably requested by the Corporation relating to such claim, -7- 8 (ii) take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation, (iii) cooperate with the Corporation in good faith in order effectively to contest such claim, and (iv) permit the Corporation to participate in any proceedings relating to such claim; provided, however, that the Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Corporation shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; provided, however, that if the Corporation directs Executive to pay such claim and sue for a refund, the Corporation shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Corporation's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder. Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Executive of an amount advanced by the Corporation pursuant to Section 9(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Corporation's complying with the requirements of Section 9(c)), promptly pay to the Corporation the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Corporation pursuant to Section 9(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Corporation does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. -8- 9 (e) An Overpayment shall be deemed to have occurred upon a "Final Determination" (as defined below) that the Excise Tax shall not be imposed upon a Payment or Payments with respect to which Executive had previously received a Gross-Up Payment. A Final Determination shall be deemed to have occurred when Executive has received from the Internal Revenue Service a refund of taxes or other reduction in his tax liability by reason of the Overpayment and upon either (i) the date a determination is made by, or an agreement is entered into with, the Internal Revenue Service which finally and conclusively binds Executive and the Internal Revenue Service, or in the event that a claim is brought before a court of competent jurisdiction, the date upon which a final determination has been made by such court and either all appeals have been taken and finally resolved or the time for all appeals has expired or (ii) the statute of limitations with respect to Executive's applicable tax return has expired. If an Overpayment occurs, the amount of the Overpayment shall be treated as a loan by the Corporation to Executive and Executive shall, within ten business days of the occurrence of such Overpayment, pay the Corporation the amount of the Overpayment plus interest at an annual rate equal to the rate provided for in Section 7872(f)(2)(A) of the Code from the date of the Gross-Up Payment (to which the Overpayment related) was paid to Executive. (f) Notwithstanding anything contained in this Agreement to the contrary, in the event it is determined that an Excise Tax will be imposed on any Payment or Payments, the Corporation shall pay to the Internal Revenue Service as Excise Tax withholding, the amount of the Excise Tax the Corporation has actually withheld from the Payment or Payments. 10. Expenses. During the Employment Period, the Corporation shall promptly pay or reimburse Executive for all reasonable expenses incurred by Executive in the performance of duties hereunder. 11. Full Settlement. The Corporation's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Corporation may have against Executive or others. The Corporation agrees to pay, to the full extent permitted by law, all legal fees and expenses which Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Corporation, Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code. 12. Payments to Beneficiaries. Any payments due under this Agreement as a result of Executive's death shall be made to Executive's surviving spouse. If Executive is not survived by a spouse, payment shall be made to the persons or entities named by Executive as his beneficiary for payment in a written document provided to the Corporation prior to his death. In the absence of a surviving spouse or any such named beneficiary, payment shall be made to Executive's estate. 13. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to Executive at 9040 Smokethorn Trail, Belvidere, Illinois 61008, or at the last address he has filed -9- 10 in writing with the Corporation or, in the case of the Corporation, at its principal Executive offices. 14. Non-Alienation. Executive shall not have any right to pledge, hypothecate, anticipate or in any way create a lien upon any amounts provided under this Agreement; and no benefits payable hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts, or by operation of law, except by will or the laws of descent and distribution. 15. Governing Law. The provisions of this Agreement shall be construed in accordance with the laws of the State of Illinois without regard to any conflict of laws provisions thereof. 16. Arbitration. Any dispute or controversy between the Corporation and the Executive, whether arising out of or relating to this Agreement, the breach of this Agreement, or otherwise, shall be settled by arbitration administered in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") then in effect, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction. Any arbitration shall be held before a single arbitrator who shall be selected by the mutual agreement of the Corporation and the Executive, unless the parties are unable to agree to an arbitrator, in which case, the arbitrator will be selected by the then President of the Chicago Bar Association. The arbitrator shall have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant, including, without limitation, the issuance of an injunction. However, either party may, without inconsistency with this arbitration provision, apply to any court having jurisdiction over such dispute or controversy and seek interim provisional, injunctive or other equitable relief until the arbitration award is rendered or the controversy is otherwise resolved. Except as necessary in court proceedings to enforce this arbitration provision or an award rendered hereunder, or to obtain interim relief, or as required by law, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of the Corporation and the Executive. The Corporation and the Executive acknowledge that this Agreement evidences a transaction involving interstate commerce. Notwithstanding any choice of law provision included in this Agreement the United States Federal Arbitration Act shall govern the interpretation and enforcement of this arbitration provision. The arbitration proceeding shall be conducted in Chicago, Illinois or such other location to which the parties may agree. The Corporation shall pay the costs of any arbitrator appointed hereunder. 17. Amendment. This Agreement may be amended or canceled by mutual agreement of the parties in writing without the consent of any other person, and, so long as Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this agreement or the subject matter hereof. 18. Successors. (a) This Agreement is personal to Executive and without the prior written consent of the Corporation shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives. -10- 11 (b) This Agreement shall inure to the benefit of and be binding upon the Corporation and its successors and assigns. (c) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. As used in this Agreement, "Corporation" shall mean the Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. Any failure by the Corporation to comply with and satisfy this Section 18(c) shall constitute a termination as provided in Section 4 of this Agreement, provided that such successor has received at least ten days' prior written notice from the Corporation or Executive of the requirements of this Section 18(c). 19. Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. [SIGNATURE PAGE FOLLOWS] -11- 12 IN WITNESS WHEREOF, Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Corporation has caused these presents to be executed in its name on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary, all as of the day and year first above written. /s/ NORMAN E. JOHNSON -------------------------------------------- Norman Johnson Chairman & CEO CLARCOR Inc. By: /s/ J. MARC ADAM ----------------------------------------- J. Marc Adam Compensation & Stock Option Committee ATTEST: /s/ DAVID J. BOYD - -------------------------------- Secretary (Seal) -12- EX-10.5 4 c59555ex10-5.txt 1994 INCENTIVE PLAN 1 EXHIBIT 10.5 CLARCOR Inc. 1994 INCENTIVE PLAN AS AMENDED THROUGH JUNE 30, 2000 2 CLARCOR INC. 1994 INCENTIVE PLAN AS AMENDED THROUGH JUNE 30, 2000 I. INTRODUCTION 1. Purposes. The purposes of the 1994 Incentive Plan (the "Plan") of CLARCOR Inc. (the "Company") and its Subsidiaries from time to time are to align the interests of the Company's stockholders and the recipients of awards under this Plan by increasing the proprietary interest of such recipients in the Company's growth and success and to advance the interests of the Company by attracting and retaining officers and key employees and well-qualified persons who are not officers or employees of the Company for service as Directors of the Company. 2. Certain Definitions. "annual retainer" shall have the meaning specified in Article VII of this Plan. "Agreement" shall mean the written agreement evidencing an award hereunder between the Company and the recipient of such award. "Beginning Stock Price" shall have the meaning specified in Article IV of this Plan. "Board" shall mean the Board of Directors of the Company. "Bonus Stock" shall mean shares of Common Stock which are not subject to Performance Measures or a Restriction Period. "Bonus Stock Award" shall mean an award of Bonus Stock under this Plan. "Broker" shall have the meaning specified in Article VIII of this Plan. "Change in Control" shall have the meaning set forth in Section IX.8(b) hereof. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Committee" shall mean the Committee, designated by the Board, consisting of three or more members of the Board, each of whom shall be (a) a "disinterested person" within the meaning of Rule 16b-3 under the Exchange Act and (b) an "outside director" under Section 162(m) of the Code. "Common Stock" shall mean the common stock, par value $1.00 per share, of the Company. "Company" shall mean CLARCOR Inc. and, for purposes of Sections II.3, III.2(b), III.3 and IV.2(g), shall mean CLARCOR Inc. and its Subsidiaries. "Custodian" shall have the meaning specified in Article VIII of this Plan. "Directors' Options" shall mean Non-Qualified Stock Options granted pursuant to Article VI hereof. "Directors' Restricted Shares" shall have the meaning set forth in Article VII hereof. "Disability" shall mean the inability of the holder of an award substantially to perform such holder's duties and responsibilities for a continuous period of at least six months. "Ending Stock Price" shall have the meaning specified in Article IV of this Plan. 1 3 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Fair Market Value" shall mean the closing sale price of a share of Common Stock on the New York Stock Exchange Composite Transactions on the date as of which such value is being determined, or, if there shall be no sale on such date, on the next preceding date for which a sale was reported; provided that if Fair Market Value for any date cannot be determined as above provided, Fair Market Value shall be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion, shall at such time deem appropriate. "Free-Standing SAR" shall mean an SAR which is not granted in tandem with, or by reference to, an option, which entitles the holder thereof to receive, upon exercise, shares of Common Stock, cash or a combination thereof with an aggregate value equal to the excess of the Fair Market Value of one share of Common Stock on the date of exercise over the base price of such SAR, multiplied by the number of such SARs which are exercised. "Incentive Stock Option" shall mean an option to purchase shares of Common Stock that meets the requirements of Section 422 of the Code, or any successor provision, which is intended by the Committee to constitute an Incentive Stock Option. "Incumbent Board" shall have the meaning set forth in Section IX.8(b) hereof. "Long-Range Performance Awards," "Long-Range Performance Cycle," "Long- Range Performance Goal," "Long-Range Performance Opportunity," "Long-Range Performance Results," and "Long-Range Performance Units" shall have the respective meanings set forth in Article IV of this Plan. "Non-employee Director" shall mean any Director of the Company or of any Subsidiary who is not an officer or employee of the Company or any Subsidiary. "Non-Qualified Stock Option" shall mean a stock option which is not an Incentive Stock Option. "Minimum Performance Goal" shall have the meaning specified in Article IV of this Plan. "MIP" shall have the meaning specified in Article VIII of this Plan. "MIP Participant" shall have the meaning specified in Article VIII of this Plan. "Participants" shall have the meaning set forth in Article IV of this Plan. "PD Authorization" shall have the meaning specified in Article VIII of this Plan. "Performance Measures" shall mean the criteria and objectives, determined by the Committee pursuant to Article III or V of this Plan, which shall be satisfied or met during the applicable Restriction Period or Performance Period, as the case may be, as a condition to the holder's receipt, in the case of a Restricted Stock Award or a Performance Share Award granted pursuant to Article III or V of this Plan, of the shares of Common Stock subject to such award, or in the case of a Performance Share Award granted pursuant to Article V of this Plan, of payment with respect to such award. Such criteria and objectives may include, but are not limited to, earnings per share, return on equity, earnings of the Company, revenues, market share or cost reduction goals, or any combination of the foregoing and any other criteria and objectives determined by the Committee. "Performance Period" shall mean a period designated by the Committee pursuant to Article V of this Plan, during which the Performance Measures applicable to a Performance Share Award shall be measured. 2 4 "Performance Share" as used in Article V of this Plan shall mean a right, contingent upon the attainment of specified Performance Measures within a specified Performance Period, to receive one share of Common Stock, which may be Restricted Stock, or in lieu thereof, the Fair Market Value of such Performance Share in cash. "Performance Share Award" shall mean an award of Performance Shares under Article V of this Plan. "Permanent and Total Disability" shall have the meaning set forth in Section 22(e)(3) of the Code or any successor thereto. "Recordkeeper" shall have the meaning specified in Article VIII of this Plan. "Replacement Option" shall mean a Non-qualified Stock Option which may be granted by the Committee subsequent to the delivery by a grantee of whole shares of Common Stock in payment of the exercise price of a stock option (the "Original Option") issued to such grantee under this Plan and which shall have the following terms: the Replacement Option shall (i) grant an option to such grantee for the number of shares of Common Stock so delivered by such grantee upon the exercise of the Original Option; (ii) have an exercise price equal to the Fair Market Price of the Common Stock on the date of exercise of the Original Option; and (iii) in all other respects have the same terms as the Original Option, including, without limitation, the same expiration date as the Original Option. "Restricted Stock" (i) shall mean shares of Common Stock which are subject to a Restriction Period and (ii) for the purposes of Article IV of this Plan, shall have the meaning specified therein. "Restricted Stock Award" shall mean an award of Restricted Stock under Article III of this Plan. "Restriction Period" shall mean a period designated by the Committee, during which the Common Stock subject to a Restricted Stock Award may not be sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or disposed of, except as provided in this Plan or the Agreement relating to such award. "SAR" shall mean a stock appreciation right. "Stock Award" shall mean a Restricted Stock Award or a Bonus Stock Award. "Subsidiaries" shall mean any corporation of which more than 50% (by number of votes) of the Voting Stock is owned, of record and beneficially, by the Company and/or by one or more Subsidiaries. "Tandem SAR" shall mean an SAR which is granted in tandem with, or by reference to, an option (including a Non-Qualified Stock Option granted prior to the date of grant of the SAR), which entitles the holder thereof to receive, upon exercise of such SAR and surrender for cancellation of all or a portion of such option, shares of Common Stock, cash or a combination thereof with an aggregate value equal to the excess of the Fair Market Value of one share of Common Stock on the date of exercise over the base price of such SAR, multiplied by the number of shares of Common Stock subject to such option, or portion thereof, which is surrendered. "Target Performance Goal" shall have the meaning specified in Article IV of this Plan. "Voting Stock" means securities of any class or classes the holders of which are ordinarily, in the absence of contingencies, entitled to vote for corporate directors (or persons performing similar functions.) 3 5 3. Administration. This Plan shall be administered by the Committee. Any one or a combination of the following grants or awards may be made under this Plan to eligible officers and other key employees of the Company and its Subsidiaries: (i) options to purchase shares of Common Stock in the form of Incentive Stock Options or Non-Qualified Stock Options, (ii) SARs in the form of Tandem SARs or Free-Standing SARs, (iii) Stock Awards in the form of Restricted Stock or Bonus Stock, (iv) Long-Range Performance Awards and (v) Performance Share Awards. The Committee shall, subject to the terms of this Plan, select eligible officers and other key employees for participation in this Plan and determine the form, amount and timing of each award, and, if applicable, the number of shares of Common Stock, the number of SARs, the number of shares of Restricted Stock and the number of Long-Range Performance Units and Performance Shares subject to an award, the exercise price or base price associated with the grant or award, the time and conditions of exercise or settlement of the grant or award and all other terms and conditions of the grant or award, including, without limitation, the form of the Agreement evidencing the award. The Committee may, subject to the terms of this Plan, interpret this Plan and the application thereof, establish rules and regulations for the administration of this Plan and impose, incidental to the grant of an award, conditions with respect to the award, competitive employment or other activities. All such interpretations, rules and regulations shall be conclusive and binding on all parties. The Committee may delegate some or all of its power and authority hereunder to the Chief Executive Officer or other executive officer of the Company as the Committee deems appropriate; provided that the Committee may not delegate its power and authority with regard to the selection for participation in this Plan of an officer or other person subject to Section 16 of the Exchange Act or decisions concerning the timing, pricing or amount of an award to such an officer or to such other person. No member of the Board of Directors or the Committee, and neither the Chief Executive Officer nor other executive officer to whom the Committee delegates any of its power and authority hereunder, shall be liable for any act, omission, interpretation, construction or determination made in connection with this Plan in good faith, and the members of the Board of Directors and the Committee and the Chief Executive Officer or other executive officer shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys' fees) arising therefrom to the full extent permitted by law and under any directors' and officers' liability insurance that may be in effect from time to time. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by a majority of the Committee without a meeting, shall be the acts of the Committee. 4. Eligibility. Participants under Article II through V of this Plan shall consist of such officers or other key employees of the Company and its Subsidiaries as the Committee in its sole discretion may select from time to time. The Committee's selection of a person to participate in this Plan at any time shall not require the Committee to select such person to participate in this Plan at any other time. Non-employee Directors of the Company shall be eligible to participate in this Plan in accordance with Articles VI and VII. Employees of the Company and its Subsidiaries shall be eligible to participate in this Plan to the extent provided in Section VIII.1 hereof. 5. Shares Available. Subject to adjustment as provided in Section IX.7 of this Plan, the total number of shares of Common Stock available for grants and awards, beginning on January 1, 1998, under Articles II through VII of this Plan in any calendar year shall be 1.5% of the outstanding 4 6 Common Stock as of January 1 of such year (the 'Annual Limit"), provided that prior to the beginning of any year, the Committee may determine that the Annual Limit for such year shall be increased by an additional 1% of the Outstanding Common Stock as of January I of such year. Any unused portion of an Annual Limit shall be carried forward and made available for awards or grants in succeeding years. Grants and awards that may be exercised or settled solely for or in cash shall not affect the number of shares of Common Stock available under this Plan. Subject to adjustment as provided in Section IX.7 of this Plan, the total number of shares of Common Stock available for grants of Incentive Stock Options in any calendar year shall be 100,000 and any portion of such number of shares of Common Stock not subject to an Incentive Stock Option granted in a calendar year shall be available for grants of Incentive Stock Options in succeeding years. To the extent (i) that an outstanding option expires or terminates unexercised or is canceled or forfeited (other than in connection with the exercise of a Tandem SAR) or (ii) that an outstanding Free-Standing SAR or outstanding Performance Share, either of which may be exercised or settled (A) solely for or in shares of Common Stock or (B) for or in shares of Common Stock or cash, expires or terminates unexercised or is canceled or forfeited, then the shares of Common Stock subject to such expired, unexercised, canceled or forfeited portion of such award shall again be available under this Plan. In addition, the total number of shares available for awards under this Plan for any year shall be increased by the number of shares delivered in payment of the exercise price of an option in accordance with Section II.1(c) during such year and decreased for shares of Common Stock subject to Replacement Options granted in such year. The shares of Common Stock represented by an award of Restricted Stock or Directors' Restricted Shares shall again be available under this Plan upon forfeiture of such award as provided in this Plan. In the event that all or a portion of a Free-Standing SAR (or exercised portion thereof) that may be exercised or settled either (i) solely for or in shares of Common Stock or (ii) for or in shares of Common Stock or cash or a Tandem SAR is exercised, the number of shares of Common Stock subject to the SAR (or exercised portion thereof) shall again be available under this Plan, except to the extent that shares of Common Stock were delivered (or would have been delivered but were withheld to satisfy withholding obligations) upon exercise of the SAR. As used herein the term "Outstanding Common Stock" shall mean all of the issued and outstanding Common Stock excluding any Common Stock held in the Company's treasury or owned by any Subsidiary. Shares of Common Stock to be delivered under this Plan (except for Article VIII hereof) shall be made available from authorized and unissued shares of Common Stock, or authorized and issued shares of Common Stock reacquired and held as treasury shares or otherwise or a combination thereof. Subject to adjustment as provided in Section IX.7 of this Plan, the number of shares of Common Stock available under Article VIII of this Plan in any calendar year shall not exceed 3% of the outstanding Common Stock as of January 1 of such year. II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS 1. Stock Options. The Committee may, in its discretion, grant options to purchase shares of Common Stock to such eligible persons as may be selected by the Committee. For the purposes of complying with Section 162(m) of the Code and rules and regulations thereunder, the maximum number of shares of Common Stock with respect to which options and SARs may be granted during any calendar year to any person shall be 250,000. Each option, or portion thereof, that is not an Incentive Stock Option, shall be a Non-Qualified Stock Option. Each option shall be granted within 10 years of the effective date of this Plan. To the extent that the aggregate Fair Market Value (determined as of the date of grant) of shares of Common Stock with respect to which options 5 7 designated as Incentive Stock Options are exercisable for the first time by a participant during any calendar year (under this Plan or any other plan of the Company, or any parent or Subsidiary of the Company) exceeds the amount (currently $100,000) established by the Code, such options shall constitute Non-Qualified Stock Options. Options shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable: (a) Number of Shares and Purchase Price. The number of shares of Common Stock subject to an option and the purchase price per share of Common Stock purchasable upon exercise of the option shall be determined by the Committee; provided that, in the case of each Incentive Stock Option, such purchase price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such option; and provided further, that if an Incentive Stock Option shall be granted to any person who, at the time such option is granted, owns capital stock of the Company possessing more than 10 percent of the total combined voting power of all classes of capital stock of the Company (or of any parent or Subsidiary of the Company) (a "ten percent bolder"), such purchase price shall be the price (currently 110% of Fair Market Value) required by the Code in order to constitute an Incentive Stock Option. (b) Option Period and Exercisability. The period for the exercise of an option shall be determined by the Committee; provided that no Incentive Stock Option shall be exercised later than 10 years after its date of grant; and provided further, that if an Incentive Stock Option shall be granted to a ten percent holder, such option shall be exercised within five years after its date of grant. The Committee shall determine whether an option shall become exercisable in cumulative or non-cumulative installments and in part or in full at any time. An exercisable option, or a portion thereof, may be exercised only with respect to whole shares of Common Stock. (c) Method of Exercise. An option may be exercised (i) by giving written notice to the Company specifying the number of whole shares of Common Stock to be purchased and accompanied by payment therefor in full (or arrangement made for such payment to the Committee's satisfaction) either (A) in cash, (B) in previously owned whole shares of Common Stock (which the optionee has held for at least six months prior to delivery of such shares and for which the optionee has good title free and clear of all liens and encumbrances) having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable pursuant to such option by reason of such exercise, (C) in cash by a broker-dealer acceptable to the Company to whom the optionee has submitted an irrevocable notice of exercise, or (D) a combination of (A) and (B), in each case to the extent determined by the Committee at the time of grant of the option, (ii) if applicable, by surrendering to the Company any Tandem SARs which are cancelled by reason of the exercise of the option and (iii) by executing such documents as the Company may reasonably request. The Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (B) through (D) above. No shares of Common Stock shall be issued until the full purchase price has been paid. 2. Stock Appreciation Rights. The Committee may, in its discretion, grant SARs to such eligible persons as may be selected by the Committee. The Agreement relating to an SAR shall specify whether the SAR is a Tandem SAR or a Free-Standing SAR. 6 8 SARs shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable: (a) Number of SARs and Base Price. The number of SARs subject to any award shall be determined by the Committee. Any Tandem SAR related to an Incentive Stock Option shall be granted at the same time such Incentive Stock Option is granted. The base price of a Tandem SAR shall be the purchase price per share of Common Stock of the related option. The base price of a Free-Standing SAR shall be determined by the Committee. (b) Exercise Period and Exercisability. The Agreement relating to an award of SARs shall specify whether such award may be settled in shares of Common Stock (including shares of Restricted Stock) or cash or a combination thereof. The period for the exercise of an SAR shall be determined by the Committee; provided that no Tandem SAR related to an Incentive Stock Option shall be exercised more than 10 years after its date of grant (or five years after its date of grant in the case of a ten percent bolder). The Committee shall determine whether an SAR may be exercised in cumulative or non-cumulative installments and in part or in full at any time. An exercisable SAR, or a portion thereof, may be exercised, in the case of a Tandem SAR, only with respect to whole shares of Common Stock and, in the case of a Free-Standing SAR, only with respect to a whole number of SARs. If an SAR is exercised for shares of Restricted Stock, a certificate or certificates representing such Restricted Stock shall be issued in accordance with Section III.2(c) and the holder of such Restricted Stock shall have such rights of a stockholder of the Company as determined pursuant to Section III.2(d). Prior to the exercise of an SAR for shares of Common Stock, including Restricted Stock, the holder of such SAR shall have no rights as a stockholder of the Company with respect to the shares of Common Stock subject to such SAR. (c) Method of Exercise. A Tandem SAR may be exercised (i) by giving written notice to the Company specifying the number of whole SARs which are being exercised, (ii) by surrendering to the Company any options which are cancelled by reason of the exercise of the Tandem SAR and (iii) by executing such documents as the Company may reasonably request. A Free-Standing SAR may be exercised (i) by giving written notice to the Company specifying the whole number of SARs which are being exercised and (ii) by executing such documents as the Company may reasonably request. 3. Termination of Employment. (a) Retirement. Subject to paragraph (e) below and unless otherwise determined by the Committee, if the employment by the Company of the holder of an option or SAR terminates by reason of retirement on or after age 65 (or prior to such age with the consent of the Committee), each option and SAR held by such holder shall become fully exercisable and may thereafter be exercised by such bolder (or such holder's guardian, legal representative or similar person) for a period specified at any time or from time to time by the Committee prior to the date on which such retirement begins; provided, that such period shall not extend beyond the expiration date of the term of such option or SAR specified in the Agreement relating thereto. (b) Disability and Death. Subject to paragraph (e) below and unless otherwise determined by the Committee at the time of grant of an option or SAR, as the case may be, if the employment by the Company of the holder of an option or SAR terminates by reason of Disability or death, each option and SAR held by such holder shall become fully exercisable and may thereafter be exercised by such holder (or such holder's executor, administrator, guardian, legal representative, beneficiary or similar person, as the case may be) for a period of two years (or 7 9 such shorter period as the Committee may specify at the time of grant) after the date of such holder's termination of employment or until the expiration of the term of such option or SAR, whichever period is shorter. (c) Other Termination. Subject to paragraph (e) below and unless otherwise determined by the Committee at any time, if the employment by the Company of the holder of an option or SAR terminates for any reason other than as described in Sections II.3(a) or (b) above, (i) each option and SAR held by such holder shall terminate 90 days after the date of such termination of employment or upon the expiration of the term of such option or SAR, whichever is shorter and (ii) such option or SAR shall be exercisable only to the extent such option or SAR was exercisable on the date of such holder's termination of employment. In no event shall such option or SAR be exercisable on any date which is after the final expiration date of such option or SAR specified in the Agreement relating thereto. (d) Death Following Termination of Employment. Subject to paragraph (e) below and unless otherwise determined by the Committee at the time of grant of an option or SAR, as the case may be, if the holder of an option or SAR dies during the respective periods specified and determined in accordance with Section II.3(a), (b) or (c) above, each option and SAR held by such holder shall be exercisable only to the extent that such option or SAR, as the case may be, was exercisable on the date of the holder's death and may thereafter be exercised by the holder's executor, administrator, legal representative, beneficiary or similar person, as the case may be, for a period of two years (or such shorter period as the Committee may specify at the time of grant) after the date of death or until the expiration of the term of such option or SAR, whichever period is shorter. (e) Termination of Employment - Incentive Stock Options. If the employment by the Company of a holder of an Incentive Stock Option terminates by reason of death or Permanent and Total Disability, each Incentive Stock Option held by such holder shall become fully exercisable and may thereafter be exercised by such holder (or such holder's executor, administrator, legal representative, beneficiary or similar person) for a period of one year (or such shorter period as the Committee may specify at the time of grant) after the date of such holder's termination of employment or until the expiration of the term of such Incentive Stock Option, whichever period is shorter. If the employment by the Company of a holder of an Incentive Stock Option terminates for any reason other than death or Permanent and Total Disability, each Incentive Stock Option held by such holder shall be exercisable only to the extent such Incentive Stock Option was exercisable on the date of such holder's termination of employment and may thereafter be exercised for a period of three months after the date of such holder's termination of employment or until the expiration of the term of the Incentive Stock Option, whichever period is shorter. If the holder of an Incentive Stock Option dies during the one-year period following termination of employment by reason of Permanent and Total Disability, or if the holder of an Incentive Stock Option dies during the three-month period following termination of employment for any reason other than death or Permanent and Total Disability, each Incentive Stock Option held by such holder shall be exercisable only to the extent such Incentive Stock Option was exercisable on the date of the holder's death and may thereafter be exercised by the holder's executor, administrator, legal representative, beneficiary or similar person for a period of one year (or such shorter period as the Committee may specify at the time of grant) after the date of death or until the expiration of the term of such Incentive Stock Option, whichever period is shorter. 8 10 III. STOCK AWARDS 1. Stock Awards. The Committee may, in its discretion, grant Stock Awards to such eligible persons as may be selected by the Committee. The Agreement relating to a Stock Award shall specify whether the Stock Award is a Restricted Stock Award or Bonus Stock Award. 2. Terms of Stock Awards. Stock Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable. (a) Number of Shares and Other Terms. The number of shares of Common Stock subject to a Restricted Stock Award or Bonus Stock Award and the Performance Measures, if any, and Restriction Period applicable to a Restricted Stock Award shall be determined by the Committee. (b) Vesting and Forfeiture. The Agreement relating to a Restricted Stock Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the forfeiture of the shares of Common Stock subject to such award (i) if specified Performance Measures are not satisfied or met during the specified Restriction Period or (ii) if the holder of such award does not remain continuously in the employment of the Company during the specified Restriction Period. Bonus Stock Awards shall not be subject to any Performance Measures or Restriction Periods. (c) Share Certificates. During the Restriction Period, a certificate or certificates representing a Restricted Stock Award shall be registered in the holder's name and a bear a legend, in addition to any legend which may be required pursuant to Section IX.6, indicating that the ownership of the shares of Common Stock represented by such certificate is subject to the restrictions, terms and conditions of this Plan and the Agreement relating to the Restricted Stock Award. All such certificates shall be deposited with the Company, together with stock powers or other instruments of assignment, each endorsed in blank, which would permit transfer to the Company of all or a portion of the shares of Common Stock subject to the Restricted Stock Award in the event such award is forfeited in whole or in part. Upon termination of any applicable Restriction Period, or upon the grant of a Bonus Stock Award, in each case subject to the Company's right to require payment of any taxes in accordance with Section IX.5, a certificate or certificates evidencing ownership of the requisite number of shares of Common Stock shall be issued to the bolder of such award. (d) Rights with Respect to Restricted Stock Awards. Unless otherwise determined by the Committee at the time of grant, and subject to the terms and conditions of a Restricted Stock Award, the holder of such award shall have all rights as a stockholder of the Company, including, but not limited to, voting rights, the right to receive dividends and the right to participate in any capital adjustment of the Company. A distribution with respect to shares of Common Stock, other than a distribution in cash, shall be deposited with the Company and shall be subject to the same restrictions as the shares of Common Stock with respect to which such distribution was made. 3. Termination of Employment. (a) Retirement, Disability and Death. Unless otherwise determined by the Committee at the time of grant of a Restricted Stock Award, if the employment by the Company of the holder of such award terminates by reason of retirement on or after age 65 (or prior to such age with the consent of the Committee), Disability or death, all Performance Measures applicable to such award shall be deemed, as of the date of such termination, to have been satisfied and the Restriction Period shall thereupon terminate. 9 11 (b) Other Termination. Unless otherwise determined by the Committee at the time of grant of a Restricted Stock Award, if the employment by the Company of the holder of a Restricted Stock Award terminates for any reason other than retirement on or after age 65 (or prior to such age with the consent of the Committee), Disability or death, the portion of such award which is then subject to a Restriction Period shall be forfeited, as of the date of such termination, and such portion shall be cancelled by the Company. IV. LONG-RANGE PERFORMANCE AWARDS 1. Long-Range Performance Awards. The Committee may, in its discretion, grant Long-Range Performance Awards pursuant to this Article IV to such officers or key employees of the Company ("Participants") as may be selected by the Committee. 2. Terms of Long-Range Performance Awards. Long-Range Performance Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable. (a) Number of Long-Range Performance Units, Shares of Restricted Stock, and Long-Range Performance Goals. The number of Long-Range Performance Units and the number of shares of Restricted Stock to be granted to each Participant and the related Long-Range Performance Goals shall be determined by the Committee. (b) Performance Cycles. A new Long-Range Performance Cycle may be established by the Committee not more frequently than once each fiscal year. (c) Grant of Long-Range Performance Opportunities. Long-Range Performance Opportunities, if granted, shall be granted by the Committee within thirty (30) days after the beginning of the first fiscal year of each Performance Cycle. (d) Awards. After the end of each Long-Range Performance Cycle, the Committee shall determine the percentage of the Long-Range Performance Opportunity earned for such Long-Range Performance Cycle in accordance with one (1) of the following: (i) If the Long-Range Performance Result does not achieve the Minimum Performance Goal, no award will be made and the Long-Range Performance Opportunity will be forfeited. (ii) If the Long-Range Performance Result achieves the Minimum Performance Goal, each Participant shall be deemed to have earned fifty percent (50%) of the Long-Range Performance Opportunity granted to the Participant. (iii) If the Long-Range Performance Result equals or exceeds the Target Performance Goal, each Participant shall be deemed to have earned one hundred percent (100%) of the Long-Range Performance Opportunity granted to the Participant. (iv) If the Long-Range Performance Result exceeds the Minimum Performance Goal but is less than the Target Performance Goal, each Participant shall be deemed to have earned the percent of the Long-Range Performance Opportunity granted to the Participant determined by reducing one hundred percent (100%) thereof by a percentage determined by the Committee at the time of grant of the Long-Range Performance Award. (e) Payment. By March 1 of the year following the end of each Long-Range Performance Cycle, a Participant shall be entitled to an award of the earned percentage, if any, of the 10 12 Restricted Stock and Long-Range Performance Units constituting the Long-Range Performance Opportunity. At the time of such award, the Company shall issue each Participant a certificate for Common Stock representing the earned percentage, if any, of the Restricted Stock without restriction unless and to the extent required by then applicable securities laws or regulations. Concurrently with any such issuance, the Company shall pay in cash to each Participant the earned percentage of the Long-Range Performance Units. The payment hereunder for each Long-Range Performance Unit earned shall be an amount equal to the Ending Stock Price; provided, however, that (a) in no event shall the number of shares of Restricted Stock awarded as part of any Long-Range Performance Award to any Participant in any year exceed 15,000, and (b) in no event shall the amount of cash payable to any Participant in any year as the earned percentage of that Participant's Long-Range Performance Units exceed 100% of the Participant's base salary for the fiscal year of the Company ending nearest November 30, 1993 (or in the case of a person who first becomes subject to the limitations of Section 162(m) of the Code after January 1, 1994, the annualized base salary of that person for the first fiscal year of the Company in which he becomes subject to that Section) increased by 5% for each fiscal year of the Company commencing after November 30, 1993, and ending on the last day of the Performance Cycle under which such award is earned. (f) Rights During Long-Range Performance Cycle. During a Long-Range Performance Cycle and until the Long-Range Performance Result is determined, a Participant shall have the right to vote and to receive dividends on any Restricted Stock granted to such Participant pursuant to this Article IV. A Participant shall not receive dividends or other payments or be entitled to any voting rights on any Long-Range Performance Units. (g) Termination of Employment. (i) A Long-Range Performance Opportunity relating to an existing Long-Range Performance Cycle shall be forfeited if the Participant's employment with the Company terminates before the end of such Long-Range Performance Cycle other than (i) for reasons stated in section (g) (ii) below or (ii) concurrently with or following a Change in Control, and, except as provided herein, all rights and benefits under such Long-Range Performance Opportunity shall cease upon such termination. However, if the termination occurs after the first year of such Long-Range Performance Cycle and the Committee in its sole discretion determines that it is in the best interest of the Company to waive such forfeiture, an award of all or part of any Long-Range Performance Opportunity may be made by the Committee. (ii) A Long-Range Performance Opportunity relating to an existing Long-Range Performance Cycle shall not be forfeited if the Participant's employment with the Company terminates before the end of such Long-Range Performance Cycle by virtue of the Participant's death, Disability, retirement on or after age 65 (or prior to such age with the consent of the Committee) or termination under circumstances determined by the Committee to be for the convenience of the Company. In the event of such termination, the Participant or his designated beneficiary shall be awarded the same percentage, if any, of the Long-Range Performance Opportunity which is earned by other Participants for such Long-Range Performance Cycle in accordance with section 2(e) of this Article IV and payment shall be made at the time payment is made to such other Participants. 11 13 3. Certain Definitions. As used in this Article IV, the following terms shall be defined as follows: "Beginning Stock Price" means the average Fair Market Value of the Common Stock computed with respect to the thirty trading days immediately preceding the start of a Long-Range Performance Cycle. "Ending Stock Price" means the average Fair Market Value of the Common Stock computed with respect to the thirty trading days immediately preceding the end of a Long-Range Performance Cycle. "Long-Range Performance Cycle" means a period of not less than three (3) consecutive fiscal years. "Long-Range Performance Goal" means a level to be established by the Committee for a Performance Cycle for one or more of the following: (a) return on the consolidated assets of the Company and its consolidated Subsidiaries; (b) return on the consolidated equity of the Company and its consolidated Subsidiaries; (c) return on investment; (d) growth in the consolidated operating profit of the Company and its consolidated Subsidiaries; (e) growth in the consolidated net earnings of the Company and its consolidated Subsidiaries; (f) growth in earnings per share of the Company; and (g) growth in consolidated cash flow of the Company and its consolidated Subsidiaries. "Long-Range Performance Opportunity" means an opportunity for a Participant to earn a combination of cash and Common Stock for a Long-Range Performance Cycle contingent upon the Company's attaining a Long-Range Performance Goal for such Long-Range Performance Cycle. Each Long-Range Performance Opportunity will consist of Long-Range Performance Units and shares of Restricted Stock in a combination to be determined by the Committee. "Long-Range Performance Result" means the performance actually achieved with respect to the Long-Range Performance Goal established by the Committee for the related Long-Range Performance Cycle. "Long-Range Performance Unit" means a right which is granted as part of a Long-Range Performance Opportunity without payment of cash consideration by the Participant and which, if and to the extent a Long-Range Performance Goal is met at the end of the Long-Range Performance Cycle, will entitle the Participant to receive an amount of cash on an unfunded basis equal to the Ending Stock Price subject to the limitations set forth in Section 2(e) of this Article IV. At the beginning of a Long-Range Performance Cycle the value of a Long-Range Performance Unit shall be equal to the Beginning Stock Price. "Minimum Performance Goal" means achieving at least eighty percent (80%) of the Long-Range Performance Goal established by the Committee. "Restricted Stock", for purposes of this Article IV, means Common Stock which is granted as part of a Long-Range Performance Opportunity without payment of cash consideration by the Participant but with restrictions, as determined by the Committee, on the Participant's right to transfer or sell the shares thereof, including the obligation to return such shares to the Company if a Long-Range Performance Goal is not met. Such restrictions will be removed if and to the extent a Long-Range Performance Goal is met. 12 14 "Target Performance Goal" means achieving one hundred percent (100%) of the Long-Range Performance Goal established by the Committee. V. OTHER PERFORMANCE BASED AWARDS 1. Other Performance Share Awards. In addition to Long-Range Performance Awards pursuant to Article IV of this Plan, the Committee may, in its discretion, grant Performance Share Awards to such eligible persons as may be selected by the Committee. 2. Term of Performance Share Awards. Performance Share Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable. (a) Number of Performance Shares and Performance Measures. The number of Performance Shares subject to any award and the Performance Measures and Performance Period applicable to such award shall be determined by the Committee. In the sole discretion of the Committee, the Committee may amend or adjust the Performance Measures or other terms and conditions of a Performance Share Award in recognition of unusual or nonrecurring events affecting the Company or its financial statements or changes in law or accounting principles. (b) Vesting and Forfeiture. The Agreement relating to a Performance Share Award shall provide, in the manner determined by the Committee in its discretion, and subject to the provisions of this Plan, for the vesting of such award, or portion thereof, if specified Performance Measures are satisfied or met within the specified Performance Period, and for the forfeiture of such award, or portion thereof, if specified Performance Measures are not satisfied or met within the specified Performance Period. (c) Settlement of Vested Performance Share Awards. The Agreement relating to a Performance Share Award (i) shall specify whether such award may be settled in shares of Common Stock (including shares of Restricted Stock) or cash, or a combination thereof, and (ii) may specify whether the holder thereof shall be entitled to receive, on a deferred basis, dividend equivalents, and, if determined by the Committee, interest on such dividend equivalents, with respect to the number of shares of Common Stock subject to such award. If a Performance Share Award is settled in shares of Restricted Stock, a certificate or certificates representing such Restricted Stock shall be issued in accordance with Section III.2(c) and the holder of such Restricted Stock shall have such rights of a stockholder of the Company as determined pursuant to Section III.2(d). Prior to the settlement of a Performance Share Award in shares of Common Stock, including Restricted Stock, the holder of such award shall have no rights as a stockholder of the Company with respect to the shares of Common Stock subject to such award. 3. Termination of Employment. (a) Retirement, Disability and Death. Unless otherwise determined by the Committee at the time of grant of a Performance Share Award, if the employment by the Company of the holder of such award terminates by reason of retirement on or after age 65 (or prior to such age with the consent of the Committee), Disability or death, all Performance Measures applicable to such award shall be deemed, as of the date of such termination, to have been satisfied and the Performance period applicable to such award shall thereupon terminate. (b) Other Termination. Unless otherwise determined by the Committee at the time of grant of a Performance Share Award, if the employment by the Company of the holder of a Performance Share Award terminates for any reason other than retirement on or after age 65 (or 13 15 prior to such age with the consent of the Committee), Disability or death, the portion of such award which is then subject to a Performance Period shall be forfeited, as of the date of such termination, and such portion shall be cancelled by the Company. VI. GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS 1. Eligibility. Each Non-Employee Director shall be granted options to purchase shares of Common Stock in accordance with this Article VI. All options granted under this Article VI shall constitute Non-Qualified Stock Options. 2. Grants of Stock Options. Each Non-employee Director shall be granted Non-Qualified Stock Options as follows: (a) Time of Grant. On the date of the 1994 annual meeting of shareholders of the Company (or, if later, on the date on which a person is first elected or begins to serve as a Non-employee Director other than by reason of termination of employment), and, thereafter, on the date of each annual meeting of shareholders of the Company, each Non-employee Director who is a Non-employee Director after such meeting of shareholders shall be granted an option to purchase 2,500 shares of Common Stock (which amount shall be pro-rated if such Non-employee Director is first elected or begins to serve as a Non-employee Director on a date other than the date of an annual meeting of shareholders) at a purchase price per share equal to the Fair Market Value of a share of Common Stock on the date of grant of such option. (b) Option Period and Exercisability. Each option granted under this Article VI shall be exercisable in part or in full at any time after the grant thereof provided that (i) each such option shall expire 10 years after its date of grant or on such earlier date as is hereinafter provided and (ii) no Common Stock acquired upon the exercise of such options shall be sold or transferred by the person exercising such option during the six month period following the date of grant of such option. An exercisable option, or portion thereof, may be exercised in whole or in part only with respect to whole shares of Common Stock. Options granted under this Article VI shall be exercisable in accordance with Section II.1(c). 3. Termination of Directorship. (a) If the holder of an option granted under this Article VI ceases to be a Director of the Company for any reason other than death, each such option held by such holder may thereafter be exercised by such holder (or such holder's guardian, legal representative or similar person) for a period of three years after the date of such holder's ceasing to be a Director or until the expiration of the term of such option, whichever period is shorter. (b) If the holder of an option granted under this Article VI ceases to be a Director of the Company by reason of death, each such option held by such holder may thereafter be exercised by such holder (or such holder's executor, administrator, legal representative, beneficiary or similar person) for a period of two years after the date of such holder's death or until the expiration of the term of such option, whichever period is shorter. (c) If the holder of an option granted under this Article VI dies during the three-year period following such holder's ceasing to be a Director of the Company as provided in paragraph 3(a), each such option held by such holder may thereafter be exercised by the holder's executor, administrator, legal representative, beneficiary or similar person for a period of one year after the date of death or until the expiration of the term of such option, whichever period is shorter. 14 16 ARTICLE VII DIRECTORS' STOCK COMPENSATION PLAN Each individual who during the term of this Plan is elected a Non-employee Director shall receive a grant of shares of Common Stock ("Directors' Restricted Shares") on the following dates: (a) on the date of such election and (b) on each anniversary of such election, provided that such person is a Non-employee Director on such date and has served as a Non-employee Director continuously since the date referred to in (a) above. Each grant shall have an aggregate Fair Market Value equal to 100% of the amount of such director's annual retainer. For purposes of this Article VII, "annual retainer" shall mean the regular, annual amount of compensation which, but for the adoption of this Article VII, would have been payable in cash to the Non-employee Director at the time of reference, not including any committee meeting or similar fees or any expense reimbursement. The provisions of Section III.2(c) and (d) shall apply to Directors' Restricted Shares. VIII. MONTHLY INVESTMENT PLAN 1. Eligibility. All full time employees of the Company and its United States Subsidiaries who have attained the age of 21 and completed three months consecutive service will be eligible to participate ("MIP Participants") in the Monthly Investment Plan ("MIP") set forth in this Article VIII. All determinations of period of service with the Company shall include periods of continuous service with any United States Subsidiary or with any United States corporation acquired by the Company or merged or consolidated with the Company, unless the Committee shall otherwise determine. 2. Participation. (a) An MIT Participant at his or her election may elect to participate in the MIP by (i) filling in and signing a form of payroll deduction authorization (the "PD Authorization") and (ii) filling in and signing a purchase order form for the purchase, on the New York Stock Exchange, of shares of Common Stock for the account of such MIP Participant. Enrollment shall become effective as soon as practicable after the PD Authorization and purchase order form are received by the Company. (b) Each month the Company will contribute for each MIP Participant an amount equal to 25% of such Participant's actual payroll deduction (as specified in the PD Authorization) up to 10% of his/ her annual base salary. The maximum payroll deduction permitted by the MIP for each MIP Participant is 15% of his/her annual base salary. The minimum payroll deduction is $10.00 per month. 3. Operation of MIP Plan. (a) The Company shall designate a member of the New York Stock Exchange, as broker (the "Broker"), to make purchase of shares of the Common Stock for the accounts of MIP Participants on the New York Stock Exchange. (b) The Company shall designate a custodian of the MIP to hold the shares so purchased on behalf of the MIP Participants (the "Custodian"). (c) The Company shall designate a recordkeeper for the MIP (the "Recordkeeper"). The Recordkeeper shall maintain records of all purchases and sales of shares by MIP Participants under the MIP. (d) The Company shall pay the administrative charges for the MIP including Custodian's and Recordkeeper's fees and Broker's commissions, if any, on purchases made from amounts deducted from the pay of MIP Participants, from amounts contributed by the Company and from reinvestment of dividends. The Broker's commission and other charges in connection with sales, or purchases not made by payroll deductions, Company contributions or reinvestment of dividends, shall be payable 15 17 directly to the Broker by the MIP Participant who orders the transactions for his/her account. Commissions under the Plan will be computed in accordance with the requirements of the New York Stock Exchange. (e) The Company shall deduct funds from each MIP Participant's pay as authorized by the PD Authorization and will, as promptly as practicable, forward to the Custodian the total of the amounts so deducted for all MIP Participants plus the Company's contributions as provided in Section VIII.2(b). A list of MIP Participants and the amount allocable to the account of each MIP Participant will be forwarded to the Broker and the Recordkeeper. (f) Upon notification from the Company, the Broker will, as promptly as practicable, purchase on the New York Stock Exchange, as many full shares of Common Stock (or fractional interests therein) as MIP funds will permit. The number of shares purchased will depend upon the market price of the Company's Common Stock on the New York Stock Exchange at the time such purchases are made. The Custodian will forward payment for purchases of shares to the Broker. Such purchases, on the basis of the average cost, shall be allocated by the Recordkeeper to the accounts of the MIP Participant in proportion to the amounts withheld by the Company for such MIP Participants. (g) No more than 3% of the outstanding Common Stock as of January 1 in any calendar year may be purchased by MIP Participants pursuant to the MIP. 4. Payroll Deductions. A PD Authorization will remain effective until terminated by a MIP Participant, and will be stated either as a percentage of base pay or in even multiples of $1.00. The MIP Participant shall specify therein the amount to be withheld from his/her pay, which amount may range from a minimum of $10.00 per month to a maximum of 15% of the participant's base salary. The PD Authorization may be revised or terminated at any time by the MIP Participant's written request submitted to the Company. Commencement, revision or termination of deductions will become effective as soon as practicable after a MIP Participant's written request is received by the Company. If a MIP Participant terminates his/her PD Authorization such MIP Participant may not resume payroll deductions for the purpose of the MIP for a one-year period. In that event, such MIP Participant may upon request receive that number of full shares of the Common Stock then held in his/her MIP account along with a check representing the net proceeds of the sale of any remaining fractional interest in shares. 5. Amendment or Termination. The Company reserves the right to discontinue use of its payroll deduction facilities for the purpose of the MIP at any time such action is deemed advisable in its judgment, and it also reserves the right to amend or discontinue the MIP at any time. Any such amendment or termination will not result in the forfeiture, before the effective date of amendment or termination of the MIP of (i) any funds deducted from the salary of any MIP Participant or contributed by the Company on behalf of any MIP Participant, (ii) any shares or fractional interest in shares purchased by the MIP Participant, or (iii) any dividends or other distribution declared in respect of such shares. 6. MIP Participant's Account. (a) At the time of purchase each MIP Participant (for whose account funds have been received) shall immediately acquire full ownership of all shares and of any fractional interest in shares purchased for his/her account. Unless otherwise requested by the MIP Participant, all shares will be registered in the name of the Custodian and will remain so registered until delivery is requested. Upon payment to the Broker of the applicable fee, the MIP Participant may request that a certificate for any or all of his/her full shares be delivered to such MIP Participant at any time. Although the MIP Participant may not assign or hypothecate his/her interest in the MIP 16 18 as such, upon purchase of shares under the MIP such shares may be sold, assigned, hypothecated or otherwise dealt with as would be the case with respect to any other shares of the Company he/she might own. (b) The MIP Participant's account will be credited with all dividends paid in respect of the full shares and any fractional interest in shares held in such account. Cash dividends will be reinvested in Common Stock at the end of each quarter. (e) Stock dividends and/or any stock splits in respect of Common Stock held in the MIP Participant's account will be credited to the account without charge. Distributions of other securities and rights to subscribe will be sold and the proceeds will be handled in the same manner as a cash dividend. (d) The MIP Participant may instruct the Broker at any time to sell any or all of his or her full shares and the fractional interest in shares held in his/her account. Upon such sale the Broker shall mail the MIP Participant a check for the proceeds, less the regular brokerage commission and any transfer taxes, registration fee or other normal charges which are payable by the MIP Participant. Such instruction to the Broker, or a request for delivery of certificates, shall not affect the MIP Participant's status as a MIP Participant unless such person also terminates his/her payroll deduction authorization. IX. GENERAL 1. Effective Date and Term of Plan. This Plan shall be submitted to the shareholders of the Company for approval and, if approved, shall become effective as of the date of approval by the Board. This Plan shall terminate 10 years after its effective date unless terminated earlier by the Board. Termination of this Plan shall not affect the terms or conditions of any award granted prior to termination. Awards hereunder may be made at any time on or after the effective date, and prior to the termination, of this Plan, provided that no award may be made later than 10 years after the effective date of this Plan. 2. Amendments. The Board of Directors may amend this Plan as it shall deem advisable, subject to any requirement of shareholder approval imposed by applicable law; provided that no amendment shall be made without shareholder approval if such amendment would (a) increase the maximum number of shares of Common Stock available under this Plan (subject to Section IX.7), (b) reduce the minimum purchase price in the case of an option or the base price in the case of an SAR, (e) effect any change inconsistent with Section 422 of the Code or (d) extend the term of this Plan. No amendment may impair the rights of a holder of an outstanding award without the consent of such holder. 3. Agreement. Each award under this Plan shall be evidenced by an Agreement setting forth the terms and conditions applicable to such award. No award shall be valid until an Agreement is executed by the Company and the recipient of such award and, upon execution by each party and delivery of the Agreement to the Company, such award shall be effective as of the effective date set forth in the Agreement. 17 19 4. Non-Transferability. No option, SAR, Long-Range Performance Unit or Performance Share shall be transferable other than by will or the laws of descent and distribution. Each option, SAR, Long-Range Performance Unit or Performance Share may be exercised or settled during the participant's lifetime only by the holder or the holder's guardian, legal representative or similar person. Except as permitted by the preceding sentence, no option, SAR, Long-Range Performance Unit or Performance Share may be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any option, SAR, Long-Range Performance Unit or Performance Share, such award and all rights thereunder shall immediately become null and void. 5. Tax Withholding. The Company shall have the right to require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash pursuant to an award hereunder, payment by the holder of such award of any Federal, state, local or other taxes which may be required to be withheld or paid in connection with such award. As determined by the Committee at the time of grant of an award, an Agreement may provide that (i) the Company shall withhold from the shares of Common Stock or the amount of cash otherwise issuable or payable to a holder, the number of whole shares of Common Stock having an aggregate Fair Market Value or the amount of cash determined as of the date the obligation to withhold or pay taxes arises in connection with an award (the "Tax Date") in the amount necessary to satisfy any such obligation or (ii) the holder may satisfy any such obligation by any of the following means: (A) a cash payment to the Company, (B) delivery to the Company of previously owned whole shares of Common Stock (which the optionee has held for at least six months prior to delivery of such shares and for which the holder has good title, free and clear of all liens and encumbrances) having an aggregate Fair Market Value, determined as of the Tax Date, equal to the amount necessary to satisfy any such obligation, (C) authorizing the Company to withhold from the shares of Common Stock or the amount of cash otherwise issuable or payable to the holder pursuant to an award, the number of whole shares of Common Stock having an aggregate Fair Market Value or the amount of cash determined as of the Tax Date, equal to the amount necessary to satisfy any such obligation, (D) in the case of the exercise of an option, a cash payment by a broker-dealer acceptable to the Company to whom the optionee has submitted an irrevocable notice of exercise or (E) any combination of (A), (B) and (C); provided, however, that the Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (B)-(E) and that in the case of a holder who is subject to Section 16 of the Exchange Act, the Company may require that the method of satisfying any such obligation be in compliance with Section 16 and the rules and regulations thereunder. Shares of Common Stock to be delivered or withheld may not have an aggregate Fair Market Value in excess of the amount determined by applying the minimum statutory withholding rate. Any fraction of a share of Common Stock which would be required to satisfy such an obligation shall be disregarded and the remaining amount due shall be paid in cash by the holder. The Company may require that any or all obligations to satisfy or pay taxes with respect to any award shall be satisfied or paid by the holder prior to the issuance of shares of Common Stock or the payment of cash by the Company. 6. Restrictions on Shares. Each award made hereunder shall be subject to the requirement that if at any time the Company determines that the listing, registration or qualification of the shares of Common Stock subject to such award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of such shares thereunder, such shares shall not be delivered unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company may 18 20 require that certificates evidencing shares of Common Stock delivered pursuant to any award made hereunder bear a legend indicating that the sale, transfer or other disposition thereof by the holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the rules and regulations thereunder. 7. Adjustment. In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of securities, liquidation, spin-off or other similar event or change in capitalization, or any distribution to holders of Common Stock other than a cash dividend, the number and class of securities available under this Plan, the number and class of securities subject to each outstanding option and the purchase price per security, the number and class of securities subject to each option to be granted to Non-employee Directors pursuant to Article VI, the number and class of securities comprising each grant of Director's Restricted Shares, the terms of each outstanding SAR, the number and class of securities subject to each outstanding Stock Award, and the terms of each outstanding Long-Range Performance Award and Performance Share Award shall be appropriately adjusted by the Committee, such adjustments to be made in the case of outstanding options and SARs without a change in the aggregate purchase price or base price. If any such adjustment would result in a fractional security (i) being available under this Plan, such fractional share shall be disregarded, or (ii) subject to a grant under this Plan, the Company shall pay the holder of such grant, in connection with the first exercise or settlement of such grant, in whole or in part, occurring after such adjustment, an amount in cash determined by multiplying (i) the fraction of such security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on the exercise or settlement date over (B) the exercise or base price, if any, of such grant. 8. Change in Control. (a)(1) Notwithstanding any provision in this Plan or any Agreement, in the event of a Change in Control pursuant to Section (b)(3) below in connection with which the holders of Common Stock receive shares of common stock that are registered under Section 12 of the Exchange Act, (i) all outstanding options and SARs shall immediately become exercisable in full, (ii) the Restriction Period applicable to any outstanding Restricted Stock Award shall lapse, (iii) the Long-Range Performance Cycle or Performance Period applicable to any outstanding Long-Range Performance Unit or Performance Share shall lapse and terminate, (iv) the Long-Range Performance Goals and Performance Measures applicable to any outstanding Long-Range Performance Award and to any outstanding Restricted Stock Award (if any) or Performance Share shall be deemed to be satisfied at the maximum level, (v) the restrictions applicable to any outstanding Director's Restricted Shares shall lapse, and (vi) there shall be substituted for each share of Common Stock available under this Plan, whether or not then subject to an outstanding award, the number and class of shares into which each outstanding share of Common Stock shall be converted pursuant to such Change in Control. In the event of any such substitution, the purchase price per share in the case of an option and the base price in the case of an SAR shall be appropriately adjusted by the Committee, such adjustments to be made in the case of outstanding options and SARs without a change in the aggregate purchase price or base price. (2) Notwithstanding any provision in this Plan or any Agreement, in the event of a Change in Control pursuant to Section (b)(1) or (2) below, or in the event of a Change in Control pursuant to Section (b)(3) below in connection with which the holders of Common Stock receive consideration other than shares of common stock that are registered under Section 12 of the Exchange Act, each outstanding award under this Plan shall be surrendered to the Company by the holder thereof, and each such award shall immediately be cancelled by the Company, and the holder shall receive, within 10 days of the occurrence of such Change in Control pursuant to Section (b)(i) or (2) below or within 19 21 10 days of the approval of the shareholders of the Company contemplated by Section (b)(3) below, a cash payment from the Company in an amount equal to (i) in the case of an option, the number of shares of Common Stock then subject to such option, multiplied by the excess, if any, of (A) the highest per share price offered to shareholders of the Company in any transaction whereby the Change in Control takes place or (B) the Fair Market Value of a share of Common Stock on the date of occurrence of the Change in Control, if the Change in Control occurs other than pursuant to an acquisition of shares of Common Stock, over the purchase price per share of Common Stock subject to the option, (ii) in the case of a Free-Standing SAR, the number of shares of Common Stock then subject to such SAR, multiplied by the excess, if any, of (A) the highest per share price offered to shareholders of the Company in any transaction whereby the Change in Control takes place or (B) the Fair Market Value of a share of Common Stock on the date of occurrence of the Change in Control, if the Change in Control occurs other than pursuant to an acquisition of shares of Common Stock, over the base price of the SAR, (iii) in the case of a Long-Range Performance Award, Restricted Stock Award, Director's Restricted Stock or Performance Share Award, the number of Long-Range Performance Units, shares of Restricted Stock, shares of Common Stock or the number of Performance Shares, as the case may be, then subject to such award, multiplied by (A) the highest per share price offered to shareholders of the Company in any transaction whereby the Change in Control takes place or (B) the Fair Market Value of a share of Common Stock on the date of occurrence of the Change in Control, if the Change in Control occurs other than pursuant to an acquisition of shares of Common Stock. Each Tandem SAR shall be surrendered by the holder thereof and shall be cancelled simultaneously with the cancellation of the related option. The Company may, but is not required to, cooperate with any person who is subject to Section 16 of the Exchange Act to assure that any cash payment in accordance with the foregoing to such person is made in compliance with Section 16 and the rules and regulations thereunder. (b) For the purpose of this Plan, a "Change in Control" shall mean: (1) The acquisition (other than from the Company) by any person, entity, or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 15% or more of either the then outstanding shares of Common Stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors; provided, however, no Change in Control shall be deemed to have occurred for any acquisition by any corporation with respect to which, following such acquisition, more than 60% of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the then outstanding shares of Common Stock or the combined voting power of the Company's then outstanding voting securities immediately prior to such acquisition in substantially the same proportions as their ownership, immediately prior to such acquisition, of the Company's then outstanding Common Stock and then outstanding voting securities, as the case may be; or (2) Individuals who, as of the date hereof, constitute the Board (as of the date hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an 20 22 individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (3) Approval by the stockholders of the Company of a reorganization, merger or consolidation, in each case, with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 60% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, or a liquidation or dissolution of the Company or of the sale of all or substantially all of the assets of the Company. 9. No Right of Employment. Neither this Plan nor any award made hereunder shall confer upon any person any right to continued employment by the Company or any affiliate of the Company or affect in any manner the right of the Company or any affiliate of the Company to terminate the employment of any person at any time without liability hereunder. 10. Rights as Shareholder. No person shall have any right as a shareholder of the Company with respect to any shares of Common Stock or other equity security of the Company which is subject to an award hereunder unless and until such person becomes a shareholder of record with respect to such shares of Common Stock or equity security. 11. Approval of Plan. This Plan and all awards made hereunder shall be null and void if the adoption of this Plan is not approved by the shareholders of the Company. 21 EX-10.5(A) 5 c59555ex10-5a.txt AMENDMENT TO THE PLAN ADOPTED DECEMBER 18, 2000 1 EXHIBIT 10.5(a) RESOLUTION OF THE BOARD OF DIRECTORS December 18, 2000 WHEREAS, pursuant to Article IX, Section 2 of the Company's 1994 Incentive Plan (the "Plan") the Board desires to amend the Plan in certain respects; NOW THEREFORE, BE IT RESOLVED, that the following Section 4 be, and it hereby is, added to Article III of the Plan: "4. Restricted Stock Units. The Committee may also, in its discretion, authorize the granting of Restricted Stock Units to such eligible persons as may be selected by the Committee (a "Grantee"). Each such grant may utilize any or all of the authorizations and shall be subject to all of the requirements contained in the following provisions: (a) Each such grant shall constitute the agreement by the Company to deliver Common Stock to the Grantee in the future in consideration of the performance of services by the Grantee, but subject to the fulfillment of such conditions, if any, as the Committee may specify. (b) Each such grant may be made without additional consideration or in consideration of a payment by the Grantee that is less that the Fair Market Value per share of Common Stock at the date of grant. (c) For the purposes of this Section 4, the term "Vesting Period" shall mean the period, if any, specified in the Agreement pertaining to any Restricted Stock Unit or Units between the date of issuance of such Units (or a portion thereof) and the date on which Common Stock is issuable pursuant thereto. Each such grant of Restricted Stock Units shall be subject to a Vesting Period of not less than one (1) year, as determined by the Committee at the date of grant, and shall provide for the early lapse and termination of such Vesting Period upon a Change in Control as provided in Article IX, Section 8 of this Plan. Unless otherwise determined by the Committee at the time of grant of any Restricted Stock Unit, if the employment by the Company or any of its subsidiaries of the Grantee thereof terminates by reason of retirement on or after age 65 (or prior to such age with the consent of the Committee), Disability or death, the Vesting Period applicable to such 2 Restricted Stock Unit shall be deemed, as of the date of such termination, to be terminated. In the event that a Grantee ceases to be an employee of the Company or one of its subsidiaries for reasons other than retirement on or after age 65 (or prior to such age with the consent of the Committee), death or Disability, any of such Grantee's Restricted Stock Units for which the Vesting Period has not expired, lapsed or been terminated shall be forfeited. (d) At the time of any grant of Restricted Stock Units, the Committee, in its discretion, may authorize the Grantee to defer the receipt of Common Stock with respect to any Unit for which the Vesting Period has expired, lapsed or been terminated for such period or periods as may be specified by the Committee and set forth in the related Agreement. (e) The Grantee shall have no right to transfer any rights under his or her award or Restricted Stock Units and, unless and until Common Stock has been issued to the Grantee pursuant to a Restricted Stock Unit, shall have no rights of ownership in the Common Stock subject to such Restricted Stock Units and shall have no right to vote such stock, but the Committee may, at or after the date of grant, authorize the payment of dividend equivalents on such Common Stock on either a current or deferred or contingent basis, either in cash or in additional shares of Common Stock. (f) Each grant or sale of Restricted Stock Units shall be evidenced by an Agreement executed on behalf of the Company by any officer and delivered to and accepted by the Grantee and shall contain such terms and provisions, consistent with the Plan, as the Committee, may approve." RESOLVED FURTHER, that Article IX, Section 8 (a)(1) of the Plan shall be amended by (i) the addition of the following clause (vi); "(vi) the Vesting Period applicable to any Restricted Stock Unit shall lapse;" and (ii) the present clause (vi) of Section 8 (a) (1) of the Plan shall be renumbered "(vii)". RESOLVED FURTHER, that Article IX, Section 8 (a)(2) of the Plan shall be amended by adding to clause (iii) thereof the words "Restricted Stock Units". EX-13.(A)(II) 6 c59555ex13-aii.txt CONSOLIDATED BALANCE SHEETS 1 EXHIBIT 13(a)ii CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------- NOVEMBER 30, 2000 AND 1999 (Dollars in thousands except per share data)
ASSETS 2000 1999 =========================================================================================== Current assets: Cash and short-term cash investments ......................... $ 10,864 $ 14,745 Accounts receivable, less allowance for losses of $5,027 for 2000 and $5,155 for 1999 .............................. 110,083 103,986 Inventories .................................................. 100,561 89,850 Prepaid expenses and other current assets .................... 3,640 11,830 Deferred income taxes ........................................ 5,331 7,259 ---------------------- Total current assets ................................ 230,479 227,670 ---------------------- Plant assets, at cost less accumulated depreciation ............. 140,121 126,026 Acquired intangibles, less accumulated amortization ............. 101,877 91,151 Pension assets .................................................. 19,519 17,879 Other noncurrent assets ......................................... 9,934 10,265 ---------------------- Total assets ........................................ $501,930 $472,991 ====================== LIABILITIES =========================================================================================== Current liabilities: Current portion of long-term debt ............................ $ 5,482 $ 5,440 Accounts payable and accrued liabilities ..................... 84,187 87,593 Income taxes ................................................. 8,157 4,442 ---------------------- Total current liabilities ........................... 97,826 97,475 ---------------------- Long-term debt, less current portion ............................ 141,486 145,981 Postretirement health care benefits ............................. 3,574 3,342 Long-term pension liabilities ................................... 4,374 3,577 Deferred income taxes ........................................... 10,663 10,238 Other long-term liabilities ..................................... 1,519 1,265 Minority interests .............................................. 395 395 Contingencies SHAREHOLDERS' EQUITY =========================================================================================== Capital stock: Preferred, par value $1, authorized 5,000,000 shares, none issued ............................................... -- -- Common, par value $1, authorized 60,000,000 shares, issued 24,381,307 in 2000 and 24,019,722 in 1999 .......... 24,381 24,020 Capital in excess of par value ............................... 5,700 948 Accumulated other comprehensive earnings: Foreign currency translation adjustments .................. (6,919) (4,151) Retained earnings ............................................ 218,931 189,901 ---------------------- Total shareholders' equity .......................... 242,093 210,718 ---------------------- Total liabilities and shareholders' equity .......... $501,930 $472,991 ======================
The accompanying notes are an integral part of the consolidated financial statements. 12 CLARCOR EX-13.(A)(III) 7 c59555ex13-aiii.txt CONSOLIDATED STATEMENT OF EARNINGS 1 EXHIBIT 13(a)(iii) CONSOLIDATED STATEMENTS OF EARNINGS - -------------------------------------------------------------------------------- FOR THE YEARS ENDED NOVEMBER 30, 2000, 1999 AND 1998 (Dollars in thousands except per share data)
2000 1999 1998 =============================================================================================================== Net sales ..................................................... $652,148 $477,869 $426,773 Cost of sales ................................................. 453,803 329,282 291,537 ------------------------------------------- Gross profit ............................................ 198,345 148,587 135,236 Selling and administrative expenses ........................... 122,358 92,510 83,573 ------------------------------------------- Operating profit ........................................ 75,987 56,077 51,663 ------------------------------------------- Other income (expense): Interest expense ........................................... (11,534) (3,733) (2,336) Interest income ............................................ 698 1,451 1,283 Other, net ................................................. (1,664) 1,820 737 ------------------------------------------- (12,500) (462) (316) ------------------------------------------- Earnings before income taxes and minority interests ..... 63,487 55,615 51,347 Provision for income taxes .................................... 23,201 20,137 19,262 ------------------------------------------- Earnings before minority interests ...................... 40,286 35,478 32,085 Minority interests in earnings of subsidiaries ................ (49) (66) (6) ------------------------------------------- Net earnings .................................................. $ 40,237 $ 35,412 $ 32,079 =========================================== Net earnings per common share: Basic ...................................................... $ 1.66 $ 1.48 $ 1.32 Diluted .................................................... $ 1.64 $ 1.46 $ 1.30 =========================================== Average number of common shares outstanding: Basic ...................................................... 24,269,675 23,970,011 24,268,250 Diluted .................................................... 24,506,171 24,313,607 24,648,623 ===========================================
The accompanying notes are an integral part of the consolidated financial statements. 13 EX-13.(A)(IV) 8 c59555ex13-aiv.txt CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 1 EXHIBIT 13(a)(iv) CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - -------------------------------------------------------------------------------- FOR THE YEARS ENDED NOVEMBER 30, 2000, 1999 AND 1998 (Dollars in thousands except per share data)
Common Stock ---------------------------------------------- Number of Shares Amount ------------------------ -------------------- Capital in In In Excess of Issued Treasury Issued Treasury Par Value ========================================================================================================================== Balance, November 30, 1997 ........................... 24,243,603 -- $16,162 $ -- $ 2,857 - -------------------------------------------------------------------------------------------------------------------------- Net earnings ......................................... -- -- -- -- -- Other comprehensive earnings: Translation adjustments ........................... -- -- -- -- -- Total comprehensive earnings....................... Purchase of treasury stock ........................... -- (528,691) -- (8,447) -- Retirement of treasury stock ......................... (528,691) 528,691 (529) 8,447 (5,553) Stock split .......................................... -- -- 8,145 -- -- Stock options exercised .............................. 212,260 -- 154 -- 2,391 Issuance of stock under award plans .................. 22,186 -- 17 -- 461 Cash dividends - $0.4425 per common share .................................. -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Balance, November 30, 1998 ........................... 23,949,358 -- 23,949 -- 156 - -------------------------------------------------------------------------------------------------------------------------- Net earnings ......................................... -- -- -- -- -- Other comprehensive earnings: Translation adjustments ........................... -- -- -- -- -- Total comprehensive earnings ...................... Purchase of treasury stock ........................... -- (50,000) -- (897) -- Retirement of treasury stock ......................... (50,000) 50,000 (50) 897 (455) Stock options exercised .............................. 82,344 -- 83 -- 740 Issuance of stock under award plans ....................................... 38,020 -- 38 -- 507 Cash dividends - $0.4525 per common share .................................. -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Balance, November 30, 1999 ........................... 24,019,722 -- 24,020 -- 948 - -------------------------------------------------------------------------------------------------------------------------- Net earnings ......................................... -- -- -- -- -- Other comprehensive earnings: Translation adjustments ........................... -- -- -- -- -- Total comprehensive earnings ...................... Business acquisition ................................. 160,704 -- 161 -- 2,734 Stock options exercised .............................. 182,479 -- 182 -- 1,898 Issuance of stock under award plans ....................................... 18,402 -- 18 -- 120 Cash dividends - $0.4625 per common share .................................. -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Balance, November 30, 2000 ........................... 24,381,307 -- $24,381 $ -- $ 5,700 ========================================================================================================================== Accumulated Other Comprehensive Retained Earnings Earnings Total ======================================================================================== Balance, November 30, 1997 .................. $ (2,700) $154,843 $171,162 - ---------------------------------------------------------------------------------------- Net earnings ................................ -- 32,079 32,079 Other comprehensive earnings: Translation adjustments .................. (293) -- (293) -------- Total comprehensive earnings.............. 31,786 -------- Purchase of treasury stock .................. -- -- (8,447) Retirement of treasury stock ................ -- (2,365) -- Stock split ................................. -- (8,145) -- Stock options exercised ..................... -- -- 2,545 Issuance of stock under award plans ......... -- -- 478 Cash dividends - $0.4425 per common share ......................... -- (10,717) (10,717) - ---------------------------------------------------------------------------------------- Balance, November 30, 1998 .................. (2,993) 165,695 186,807 - ---------------------------------------------------------------------------------------- Net earnings ................................ -- 35,412 35,412 Other comprehensive earnings: Translation adjustments .................. (1,158) -- (1,158) -------- Total comprehensive earnings.............. 34,254 -------- Purchase of treasury stock .................. -- -- (897) Retirement of treasury stock ................ -- (392) -- Stock options exercised ..................... -- -- 823 Issuance of stock under award plans .............................. -- -- 545 Cash dividends - $0.4525 per common share ......................... -- (10,814) (10,814) - ---------------------------------------------------------------------------------------- Balance, November 30, 1999 .................. (4,151) 189,901 210,718 - ---------------------------------------------------------------------------------------- Net earnings ................................ -- 40,237 40,237 Other comprehensive earnings: Translation adjustments .................. (2,768) -- (2,768) -------- Total comprehensive earnings.............. 37,469 -------- Business acquisition ........................ -- -- 2,895 Stock options exercised ..................... -- -- 2,080 Issuance of stock under award plans .............................. -- -- 138 Cash dividends - $0.4625 per common share ......................... -- (11,207) (11,207) - -------------------------------------------------------------------------------------- Balance, November 30, 2000 .................. $ (6,919) $218,931 $242,093 ======================================================================================
The accompanying notes are an integral part of the consolidated financial statements. 14 CLARCOR EX-13.(A)(V) 9 c59555ex13-av.txt CONSOLIDATED STATEMENTS OF CASH FLOWS 1 EXHIBIT 13(a)(v) CONSOLIDATED STATEMENTS OF CASH FLOWS - -------------------------------------------------------------------------------- FOR THE YEARS ENDED NOVEMBER 30, 2000, 1999 AND 1998 (Dollars in thousands)
2000 1999 1998 ========================================================================================================== Cash flows from operating activities: Net earnings ................................................... $ 40,237 $ 35,412 $ 32,079 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation ................................................ 17,537 13,729 11,692 Amortization ................................................ 3,542 1,643 688 Minority interests in earnings of subsidiaries .............. 49 66 6 Net (gain) loss on dispositions of plant assets ............. 109 (1,660) (1,310) Changes in assets and liabilities, net of business acquisitions: Accounts receivable ...................................... (3,448) (6,062) (3,460) Inventories .............................................. (9,636) (4,585) 1,046 Prepaid expenses and other current assets ................ 8,040 (1,369) (912) Other noncurrent assets .................................. (554) (18) (3,235) Accounts payable and accrued liabilities ................. (1,170) 4,790 4,841 Pension assets and liabilities, net ...................... (7,430) (583) (1,463) Income taxes ............................................. 4,663 (2,366) 2,065 Deferred income taxes .................................... 2,191 (355) 230 ----------------------------------- Net cash provided by operating activities ............. 54,130 38,642 42,267 ----------------------------------- Cash flows from investing activities: Additions to plant assets ...................................... (29,005) (21,822) (15,825) Business acquisitions, net of cash acquired .................... (12,735) (142,709) (7,984) Proceeds from note receivable .................................. -- -- 2,500 Dispositions of plant assets ................................... 55 3,873 2,542 Other, net ..................................................... (440) -- (523) ----------------------------------- Net cash used in investing activities ................. (42,125) (160,658) (19,290) ----------------------------------- Cash flows from financing activities: Proceeds from multicurrency revolving credit agreement ......... 43,200 115,000 -- Payments on multicurrency revolving credit agreement ........... (42,200) -- -- Reduction of long-term debt .................................... (7,034) (468) (2,669) Sales of capital stock under stock option plan ................. 1,379 680 1,890 Purchases of treasury stock .................................... -- (897) (8,447) Cash dividends paid ............................................ (11,207) (10,814) (10,717) ----------------------------------- Net cash provided by (used in) financing activities .... (15,862) 103,501 (19,943) ----------------------------------- Net effect of exchange rate changes on cash ....................... (24) (61) (37) ----------------------------------- Net change in cash and short-term cash investments ............................................... (3,881) (18,576) 2,997 Cash and short-term cash investments, beginning of year .............................................. 14,745 33,321 30,324 ----------------------------------- Cash and short-term cash investments, end of year ................. $ 10,864 $ 14,745 $ 33,321 ===================================
The accompanying notes are an integral part of the consolidated financial statements. 15 EX-13.(A)(VI) 10 c59555ex13-avi.txt NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1 EXHIBIT 13(a)(vi) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Dollars in thousands except per share data) A. ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include all domestic and foreign subsidiaries that are more than 50% owned and controlled. CLARCOR Inc. and its subsidiaries are hereinafter collectively referred to as the "Company" or CLARCOR. Minority interests represent an outside shareholder's 10% ownership of the common stock of Filtros Baldwin de Mexico (FIBAMEX) and outside shareholders' 20% ownership of Baldwin-Unifil S.A. FOREIGN CURRENCY TRANSLATION Financial statements of foreign subsidiaries are translated into U.S. dollars at current rates, except that revenues, costs and expenses are translated at average current rates during each reporting period. Net exchange gains or losses resulting from the translation of foreign financial statements and the effect of exchange rate changes on intercompany transactions of a long-term investment nature are accumulated with other comprehensive earnings as a separate component of shareholders' equity and are presented, net of tax, in the Consolidated Statements of Shareholders' Equity. PLANT ASSETS Depreciation is provided by the straight-line and accelerated methods for financial statement purposes and by the accelerated method for tax purposes. The provision for depreciation is based on the estimated useful lives of the assets (15 to 40 years for buildings and improvements and 3 to 15 years for machinery and equipment). It is the policy of the Company to capitalize renewals and betterments and to charge to expense the cost of current maintenance and repairs. EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED AND OTHER INTANGIBLE ASSETS The excess of cost over fair value of assets acquired is being amortized over a forty-year period using the straight-line method. Other acquired intangible assets are being amortized over the estimated periods to be benefited using the straight-line method. These intangibles include trademarks (40 year life), patents (average 14 year life), and other identifiable intangible assets with lives ranging from one to thirty years. In accordance with Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of," the Company determines any impairment losses based on underlying cash flows related to specific groups of plant assets, identifiable intangibles and excess cost over fair value of assets acquired and would first apply such impairment losses to related goodwill. STATEMENTS OF CASH FLOWS All highly liquid investments that are readily saleable are considered to be short-term cash investments. The carrying amount approximates fair value. CONCENTRATIONS OF CREDIT AND FINANCIAL INSTRUMENTS Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of short-term cash investments and trade receivables. The Company places its short-term cash investments in high-grade municipal securities and classifies them as trading securities. At November 30, 2000 and 1999, the Company held short-term municipal securities with a total cost of $2,900 and $12,720, respectively. Cost approximates market for these securities. Concentrations of credit risk with respect to trade receivables are limited due to the Company's large number of customers and their dispersion across many different industries and locations. The Company makes limited use of derivative financial instruments and does not use them for trading or speculative purposes. Derivative financial instruments are used principally to manage certain interest rate and foreign currency risks. Interest rate swap agreements are utilized to convert certain floating rate debt into fixed rate debt. Cash flows related to interest rate swap agreements are included in interest expense over the terms of the agreements. INCOME TAXES The Company provides for income taxes in accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." SFAS 109 requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities. REVENUE RECOGNITION Revenue is recognized upon shipment of goods to customers. COMPREHENSIVE EARNINGS Foreign currency translation adjustments are included in other comprehensive earnings in accordance with Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income." USE OF MANAGEMENT'S ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ACCOUNTING PERIOD The Company's fiscal year ends on the Saturday closest to November 30. The fiscal year ended December 2, 2000 included fifty-three weeks. The fiscal years ended November 27, 1999 and November 28, 1998 were comprised of fifty-two weeks. In the consolidated financial statements, all fiscal years are shown to begin as of December 1 and end as of November 30 for clarity of presentation. 16 CLARCOR 2 - -------------------------------------------------------------------------------- RECLASSIFICATIONS Certain reclassifications have been made to conform prior years' data to the current presentation. These reclassifications had no effect on reported earnings. B. BUSINESS COMBINATIONS AND INVESTMENTS IN AFFILIATES During 2000, the Company purchased Filter Products, Inc., a Sacramento, California liquid process filtration manufacturer, and two air filtration distributors. All three of these acquisitions were accounted for under the purchase method of accounting. Two of the acquisitions were paid for in cash. The purchase price of the other was paid in cash and stock. For these acquisitions, the Company paid $12,730 in cash, net of cash received, and issued 160,704 shares of its common stock (or $2,895). These acquisitions did not have a significant impact on the results of the Company. On September 10, 1999, the Company completed its acquisitions of Purolator Air Filtration (Purolator), Facet International (Facet), and Purolator Facet, Inc. (PFI), manufacturers of air and liquid filtration products, for approximately $140,985, net of cash received, including acquisition expenses. The purchase price was paid in cash with available funds and proceeds from long-term borrowings of approximately $115,000 from a revolving credit facility. (See Note G.) As a result of the acquisitions, Purolator, Facet, and PFI became subsidiaries of the Company and are included in the Company's Industrial/Environmental Filtration segment. The Company's non-cash investing and financing activities related to this acquisition included assumed liabilities of $25,910. The transaction was accounted for under the purchase method of accounting with the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired recorded as goodwill and amortized over 40 years by the straight-line method. Other acquired intangible assets are being amortized as discussed in Note A. During fiscal year 2000, the Company finalized the purchase price according to the terms of the purchase agreement and completed the estimates of liabilities assumed, including those associated with exit and other costs of the acquisition. The finalized allocation to major categories of assets and liabilities resulted in a reduction to goodwill of $34. As part of the final allocation of purchase price, the Company accrued an additional $800 for severance and exit costs during 2000, resulting in a total accrual of $1,085 of which $329 was paid out as of November 30, 2000. The remaining cash payments for severance and exit costs are expected to be paid out by the end of 2001. The operating results are included in the Company's consolidated results of operations from September 1, 1999, the effective date of the acquisitions. The following unaudited pro forma information summarizes the results of operations for the periods indicated as if the acquisitions had been completed as of the beginning of the periods presented. The pro forma information gives effect to actual operating results prior to the acquisitions, adjusted to include the pro forma effect of interest expense, depreciation, amortization of intangibles and income taxes. These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisitions had occurred as of the beginning of the periods presented or that may be obtained in the future. Years Ended November --------------------------- 1999 1998 --------------------------- Net sales ..................... $591,869 $576,973 Net earnings .................. 36,625 32,277 Basic earnings per share ...... 1.53 1.33 Diluted earnings per share .... 1.51 1.31 During 1998, the Company purchased Air Technologies, Inc. (ATI), an Ottawa, Kansas manufacturer of air filtration products, and a small filter distributor. Each acquisition was made for cash and accounted for under the purchase method of accounting. Also during 1998, the Company purchased the remaining 50% interest in Baldwin Australia and an additional 10% interest in Baldwin-Unifil S.A. These acquisitions did not have a significant impact on the results of the Company. C. INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for approximately 43% and 42% of the Company's inventories at November 30, 2000 and 1999, respectively, and by the first-in, first-out (FIFO) method for all other inventories. The FIFO method approximates current cost. Inventories are summarized as follows: 2000 1999 ------------------- Raw materials ..................... $ 38,444 $ 33,274 Work-in-process ................... 14,253 15,203 Finished products ................. 48,316 42,978 ------------------- Total at FIFO ..................... 101,013 91,455 Less excess of FIFO over LIFO ..... 452 1,605 ------------------- $100,561 $ 89,850 =================== During 2000, certain LIFO inventory quantities were reduced resulting in a partial liquidation of the LIFO bases. The effect on net earnings was not material. 17 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Dollars in thousands except per share data) D. PLANT ASSETS Plant assets at November 30, 2000 and 1999 were as follows: 2000 1999 ------------------- Land .............................. $ 3,911 $ 3,853 Buildings and building fixtures ... 67,986 65,845 Machinery and equipment ........... 182,689 163,481 Construction-in-process ........... 17,666 11,108 ------------------- 272,252 244,287 Less accumulated depreciation ..... 132,131 118,261 ------------------- $140,121 $126,026 =================== E. ACQUIRED INTANGIBLES Acquired intangibles, net of accumulated amortization at November 30, 2000 and 1999 consisted of the following: 2000 1999 ------------------- Excess of cost over fair value of assets acquired ..... $ 62,333 $ 49,784 Trademarks ............................................ 29,090 30,140 Other acquired intangibles ............................ 10,454 11,227 ------------------- $101,877 $ 91,151 =================== Accumulated amortization was $13,812 and $9,890 at November 30, 2000 and 1999, respectively. F. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities at November 30, 2000 and 1999 were as follows: 2000 1999 ----------------- Accounts payable ............................ $40,826 $42,477 Accrued salaries, wages and commissions ..... 12,678 10,875 Compensated absences ........................ 6,192 6,224 Accrued pension liabilities ................. 262 6,711 Other accrued liabilities ................... 24,229 21,306 ----------------- $84,187 $87,593 ================= G. LONG-TERM DEBT Long-term debt at November 30, 2000 and 1999 consisted of the following: 2000 1999 ------------------- Multicurrency revolving credit agreement, interest payable at the end of each funding period at an adjusted LIBOR ....... $116,000 $115,000 Promissory note, interest payable semi-annually at 6.69% .................... 20,000 25,000 Industrial Revenue Bonds, at 2.20% to 5.85% interest rates ...................... 10,063 10,438 Other obligations, at 7.75% to 10% interest rates ............................ 905 983 ------------------- 146,968 151,421 Less current portion ......................... 5,482 5,440 ------------------- $141,486 $145,981 =================== A fair value estimate of $147,419 and $143,867 for long-term debt in 2000 and 1999, respectively, is based on the current interest rates available to the Company for debt with similar remaining maturities. In September 1999, the Company entered into a three-year, multicurrency revolving credit agreement with a group of participating financial institutions under which it may borrow up to $185,000. The agreement, which was extended for one additional year in 2000, provides that loans may be made under a selection of currencies and rate formulas. The interest rate is based upon either a defined Base Rate or the London Interbank Offered Rate (LIBOR) plus a variable spread of .55% to 1.25%. The variable spread is based on the ratio of the Company's outstanding borrowings as compared with its shareholders' equity. The spread was .80% at November 30, 2000. Facility fees and other fees on the entire loan commitment are payable for the duration of this facility. At November 30, 2000 and 1999, $116,000 and $115,000 were outstanding under this agreement. Borrowings under the credit facility are unsecured but are guaranteed by certain of the Company's subsidiaries. The agreement related to this borrowing includes certain restrictive covenants that include maintaining minimum consolidated net worth of $160,000, limiting new borrowings, maintaining a minimum interest coverage, and restricting certain changes in ownership as stipulated in the agreement. The Company was in compliance with these covenants as of November 30, 2000 and 1999. This agreement also includes a letter of credit facility, against which $10,841 and $11,405 in letters of credit had been issued as of November 30, 2000 and 1999, respectively. During 2000, the Company entered into several interest rate agreements to manage its interest exposure related to the multicurrency credit revolver. Two agreements were in place at November 30, 2000 covering the outstanding amount on the multicurrency credit revolver. One agreement provides for the Company to pay a 7.12% fixed interest rate on a notional amount of $60,000 and matures in December 2000. The other agreement provides for the Company to pay a 7.34% fixed interest rate on a notional amount of $60,000 and is effective until September 11, 2002. Under both agreements the Company will receive interest at floating rates based on LIBOR. At November 30, 2000 and 1999, LIBOR was 7.46% and 6.51%, respectively. The fair market value of the agreements was a negative $1,183 at November 30, 2000. The 6.69% promissory note matures July 25, 2004, but the Company is required to prepay, without premium, certain principal amounts as stated in the agreement. Under the note agreement, the Company must meet certain restrictive covenants. The covenants were amended during 1999 to be similar to those contained in the multicurrency revolving credit facility. 18 CLARCOR 4 - -------------------------------------------------------------------------------- On February 1, 1996, the Company, in cooperation with the South Dakota Economic Development Finance Authority, issued $8,410 of Industrial Revenue Bonds. The bonds are due February 1, 2016, with a variable rate of interest that is reset weekly. The Company has other outstanding Industrial Revenue Bonds of $1,653 and $2,028 as of November 30, 2000 and 1999, respectively. These mature in 2005 and are backed by a letter of credit that requires an annual fee of 0.925% of the outstanding balance. This letter of credit expires in May 2001. Exclusive of the multicurrency revolving credit facility, principal maturities of long-term debt for the next five fiscal years ending November 30 approximates: $5,482 in 2001, $5,500 in 2002, $5,531 in 2003, $5,581 in 2004, $305 in 2005 and $8,569 thereafter. The borrowings under the revolving credit facility that matures in 2003 have been classified as long-term as the Company has both the intent and ability to refinance this amount on a long-term basis. Interest paid totaled $10,714, $2,228 and $2,293 during 2000, 1999 and 1998, respectively. H. LEASES The Company has various lease agreements for offices, warehouses, manufacturing plants, and equipment that expire on various dates through June 2007 and contain renewal options. Some of these leases provide for payment of property taxes, utilities and certain other expenses. Commitments for minimum rentals under noncancellable leases at November 30, 2000 for the next five years are: $8,176 in 2001, $7,481 in 2002, $6,016 in 2003, $4,463 in 2004 and $2,385 in 2005. Rent expense totaled $8,367, $6,063 and $5,189 for the years ended November 30, 2000, 1999 and 1998, respectively. I. PENSION AND OTHER POSTRETIREMENT PLANS The Company has defined benefit pension plans and postretirement health care plans covering certain employees and retired employees. In addition to the plan assets related to qualified plans, the Company has funded approximately $2,580 and $8,550 at November 30, 2000 and 1999, respectively, in restricted trusts for its nonqualified plans. These trusts are included in other current and other noncurrent assets in the Company's Consolidated Balance Sheets. The following table shows reconciliations of the pension plans and other postretirement plan benefits as of November 30, 2000 and 1999. The accrued pension benefit liability includes an unfunded benefit obligation of $5,231 and $11,445 as of November 30, 2000 and 1999, respectively. The obligations have been determined with a weighted average discount rate of 7.75% and 7.50% in 2000 and 1999, respectively, and a rate of increase in future compensation of primarily 5.0% in both years. The expected weighted average long-term rate of return was 9.0% in both 2000 and 1999.
Pension Postretirement Benefits Benefits ---------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------- Change in benefit obligation: Benefit obligation at beginning of year ........................... $ 73,356 $ 75,986 $ 3,866 $ 2,342 Service cost ......................... 3,122 2,364 92 13 Interest cost ........................ 5,021 5,251 280 149 Actuarial (gains) / losses ........... (2,038) (6,378) (6) 18 Acquisitions ......................... -- -- -- 1,606 Benefits paid ........................ (10,481) (3,867) (150) (262) -------------------------------------------- Benefit obligation at end of year .... 68,980 73,356 4,082 3,866 -------------------------------------------- Change in plan assets: Fair value of plan assets at beginning of year ................. 87,214 79,828 -- -- Actual return on plan assets ......... 3,012 11,076 -- -- Benefits paid ........................ (3,540) (3,690) -- -- -------------------------------------------- Fair value of plan assets at end of year ........................... 86,686 87,214 -- -- -------------------------------------------- Funded status ........................ 17,706 13,858 (4,082) (3,866) Unrecognized net transition asset .... -- (1,056) -- -- Unrecognized prior service cost ...... 188 210 -- -- Unrecognized net actuarial (gain) / loss ..................... (3,011) (5,421) 238 244 -------------------------------------------- Net amount recognized ................ $ 14,883 $ 7,591 $ (3,844) $ (3,622) ============================================ Amounts recognized in the Consolidated Balance Sheets include: Prepaid benefit cost ........... $ 19,519 $ 17,879 $ -- $ -- Accrued benefit liability ...... (4,636) (10,288) (3,844) (3,622) -------------------------------------------- Net amount recognized ................ $ 14,883 $ 7,591 $ (3,844) $ (3,622) ============================================
The components of net periodic benefit cost for the pensions are shown below. Pension Benefits -------------------------------- 2000 1999 1998 -------------------------------- Components of net periodic benefit cost: Service cost ............................. $ 3,122 $ 2,364 $ 2,248 Interest cost ............................ 5,021 5,251 4,882 Expected return on plan assets ........... (7,695) (7,041) (6,883) Additional recognition amount ............ -- 196 196 Amortization of unrecognized: Net transition asset .................. (1,056) (1,056) (1,056) Prior service cost .................... 21 62 63 Net actuarial loss .................... 7 54 64 ------- ------- ------- Net periodic benefit (income) / cost ....................... $ (580) $ (170) $ (486) ======= ======= ======= The postretirement obligations represent a fixed dollar amount per retiree. The Company has the right to modify or terminate these benefits. The participants will assume substantially all 19 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Dollars in thousands except per share data) future health care benefit cost increases, and therefore, future increases in health care costs will not increase the postretirement benefit obligation or cost to the Company. Therefore, the Company has not assumed any annual rate of increase in the per capita cost of covered health care benefits for future years. The components of net periodic benefit cost for postretirement health care benefits are shown below. Postretirement Benefits ----------------------- 2000 1999 1998 ----------------------- Components of net periodic benefit cost: Service cost ................................ $ 92 $ 13 $ 13 Interest cost ............................... 280 149 166 ----------------------- Net periodic benefit cost ................... $372 $162 $179 ======================= The Company also sponsors various defined contribution plans that provide employees with an opportunity to accumulate funds for their retirement. The Company matches the contributions of participating employees based on the percentages specified in the respective plans. The Company recognized expense related to these plans of $1,408, $1,211 and $1,037 in 2000, 1999 and 1998, respectively. J. INCOME TAXES The provision for income taxes consisted of: 2000 1999 1998 ------------------------------- Current: Federal .... $ 17,693 $ 18,398 $ 16,976 State ...... 2,574 2,177 2,784 Foreign .... 1,063 547 585 Deferred ...... 1,871 (985) (1,083) ------------------------------- $ 23,201 $ 20,137 $ 19,262 =============================== Income taxes paid, net of refunds, totaled $16,458, $22,234 and $16,199 during 2000, 1999 and 1998, respectively. Earnings before income taxes and minority interests included the following components: 2000 1999 1998 --------------------------- Domestic income .... $60,471 $53,467 $49,762 Foreign income ..... 3,016 2,148 1,585 --------------------------- Total ........... $63,487 $55,615 $51,347 =========================== The provision for income taxes resulted in effective tax rates that differ from the statutory federal income tax rates. The reasons for these differences are as follows: Percent of Pretax Earnings --------------------------- 2000 1999 1998 --------------------------- Statutory U.S. tax rates .... 35.0% 35.0% 35.0% State income taxes, net of federal benefit .......... 2.6 2.6 3.4 Foreign sales ............... (0.8) (0.8) (0.7) Other, net .................. (0.3) (0.6) (0.2) --------------------------- Consolidated effective income tax rate .......... 36.5% 36.2% 37.5% =========================== The components of the net deferred tax liability as of November 30, 2000 and 1999 were as follows: 2000 1999 -------------------- Deferred tax assets: Deferred compensation ........................ $ 3,930 $ 2,792 Other postretirement benefits ................. 783 719 Foreign net operating loss carryforwards ..... 475 203 Accounts receivable .......................... 2,177 1,538 Inventories .................................. 1,774 1,975 Accrued liabilities and other ................ 2,009 751 -------------------- Total gross deferred tax assets ................. 11,148 7,978 -------------------- Deferred tax liabilities: Pensions ..................................... (5,209) (2,656) Plant assets ................................. (11,189) (7,911) Other ........................................ (82) (390) -------------------- Total gross deferred tax liabilities ............ (16,480) (10,957) -------------------- Net deferred tax liability ...................... $ (5,332) $ (2,979) ==================== The Company expects to realize the deferred tax assets, including foreign net operating loss carryforwards, through the reversal of taxable temporary differences and future earnings. As of November 30, 2000, the Company has not provided taxes on unremitted foreign earnings of approximately $3,000 that are intended to be indefinitely reinvested to finance operations and expansion outside the United States. If such earnings were distributed beyond the amount for which taxes have been provided, foreign tax credits would substantially offset any incremental U.S. tax liability. K. CONTINGENCIES The Company is involved in legal actions arising in the normal course of business. Additionally, the Company is party to various proceedings relating to environmental issues. The U.S. Environmental Protection Agency (EPA) and/or other responsible state agencies have designated the Company as a potentially responsible party (PRP), along with other companies, in remedial activities for the cleanup of waste sites under the federal Superfund statute. Environmental and related remediation costs are difficult to quantify for a number of reasons, including the number of parties involved, the difficulty in determining the extent of the contamination, the length of time remediation may require, the 20 CLARCOR 6 - -------------------------------------------------------------------------------- complexity of the environmental regulation and the continuing advancement of remediation technology. Applicable federal law may impose joint and several liability on each PRP for the cleanup. It is the opinion of management, after consultation with legal counsel, that additional liabilities, if any, resulting from these legal or environmental issues, are not expected to have a material adverse effect on the Company's financial condition or consolidated results of operations. L. PREFERRED STOCK PURCHASE RIGHTS In March 1996, the Board of Directors of CLARCOR adopted a Shareholder Rights Plan to replace an existing plan that expired on April 25, 1996. Under the terms of the Plan, each shareholder received rights to purchase shares of CLARCOR Series B Junior Participating Preferred Stock. The rights become exercisable only after the earlier to occur of (i) 10 business days after the first public announcement that a person or group (other than a CLARCOR related entity) has become the beneficial owner of 15% or more of the outstanding shares of CLARCOR Common Stock; or (ii) 10 business days (unless extended by the CLARCOR Board in accordance with the Rights Agreement) after the commencement of, or the intention to make, a tender or exchange offer, the consummation of which would result in any person or group (other than a CLARCOR related entity) becoming such a 15% beneficial owner. Each right entitles the holder to buy one-hundredth of a share of such preferred stock at an exercise price of $80 subject to certain adjustments. Once the rights become exercisable, each right will entitle the holder, other than the acquiring individual or group, to purchase a number of CLARCOR common shares at a 50% discount to the then-market price of CLARCOR Common Stock. In addition, under certain circumstances, if the rights become exercisable, the holder will be entitled to purchase the stock of the acquiring individual or group at a 50% discount. The Board may also elect to redeem the rights at $.01 per right. The rights expire on April 25, 2006. The authorized preferred stock includes 300,000 shares designated as Series B Junior Participating Preferred Stock. M. INCENTIVE PLAN In 1994, the shareholders of CLARCOR adopted the 1994 Incentive Plan, which allows the Company to grant stock options, restricted stock and performance awards to officers, directors and key employees. The 1994 Incentive Plan incorporates the various incentive plans in existence prior to March 1994. In addition, the Company has, in connection with the 1997 acquisition of United Air Specialists, Inc. (UAS), assumed the stock option plans of UAS and has reserved 20,669 shares of the Company's common stock for issuance under the assumed UAS stock option plans. The amended 1994 Incentive Plan allows grants and awards of up to 1.5% of the outstanding common stock as of January 1 of each calendar year. In addition, the Compensation and Stock Option Committee of the Company's Board of Directors may approve an additional 1% of outstanding common stock to be awarded during any calendar year. Any portion that is not granted in a given year is available for future grants. After the close of fiscal year 2000, 368,153 shares were granted, including the restricted stock units discussed hereafter. The following is a description and a summary of key provisions related to this plan. STOCK OPTIONS In accordance with Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation," the Company accounts for stock-based compensation using the intrinsic value method as prescribed under Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees," and related Interpretations and provides the disclosure-only provisions of SFAS 123. Nonqualified stock options may, at the discretion of the Board of Directors, be granted at the fair market value at the date of grant or at an exercise price less than the fair market value at the date of grant. All options granted in 2000, 1999 and 1998 were at the fair market value at the dates of the grants. Options granted to key employees prior to the end of fiscal year 2000 vest 25% per year beginning at the end of the third year; therefore, they become fully exercisable at the end of six years. Options granted to key employees after the close of fiscal year 2000 vest 25% per year beginning at the end of the first year; therefore, they become fully exercisable at the end of four years. Options granted to non-employee directors vest immediately. All options expire ten years from the date of grant unless otherwise terminated. The following table summarizes the activity under the nonqualified stock option plans.
2000 1999 1998 ------------------------------------------------------------------------- WEIGHTED Weighted Weighted AVERAGE Average Average EXERCISE Exercise Exercise SHARES PRICE Shares Price Shares Price ------------------------------------------------------------------------- Outstanding at beginning of year ..... 2,239,162 $ 14.83 2,116,182 $ 14.18 1,895,086 $ 12.15 Granted ................. 412,404 17.80 287,982 18.00 518,239 19.86 Exercised/ surrendered ........... (365,540) 12.75 (165,002) 12.93 (297,143) 11.10 ------------------------------------------------------------------------- Outstanding at end of year ........... 2,286,026 $ 14.53 2,239,162 $ 14.83 2,116,182 $ 14.18 ======================================================================= Options exercisable at end of year ........ 1,508,859 $ 14.68 1,159,462 $ 12.62 1,110,433 $ 12.12 =======================================================================
21 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Dollars in thousands except per share data) The following table summarizes information about the options at November 30, 2000: Options Outstanding Options Exercisable ---------------------------------------------------------- Weighted Weighted Weighted Range of Average Average Average Exercise Exercise Remaining Exercise Prices Number Price Life in Years Number Price - ----------------------------------------------------------------------------- $11.55 - $15.83 1,225,885 $13.06 3.94 1,100,261 $12.92 $17.00 - $21.67 1,060,141 $18.85 7.99 408,598 $19.35 In addition, stock options outstanding and exercisable at November 30, 2000 and 1999 assumed as part of the UAS acquisition were 20,669 and 29,005, respectively, and no further grants were made. These substitute options have an exercisable price range per share of $2.40 to $5.94 at November 30, 2000 and expire between 2002 and 2005. LONG RANGE PERFORMANCE AWARDS Officers and key employees may be granted target awards of Company shares of common stock and performance units, which represent the right to a cash payment. The awards are earned and shares are issued only to the extent that the Company achieves performance goals determined by the Board of Directors during a three-year performance period. The Company granted 28,383 and 26,656 performance shares on December 1, 1999 and 1998, respectively. As of November 30, 2000, the Company has cancelled 2,496, 4,860 and 802 shares of the 2000, 1999 and 1998 grants, respectively. The shares vest at the end of three years. During the performance period, officers and key employees are permitted to vote the restricted stock and receive compensation equal to dividends declared on common shares. The Company accrues compensation expense assuming attainment of the performance goals ratably during the performance cycle. Compensation expense for the plan totaled $901, $534 and $435 in 2000, 1999 and 1998, respectively. Distribution of Company common stock and cash for the performance periods ended November 30, 2000, 1999 and 1998 were $488, $485 and $537, respectively. Subsequent to the end of the fiscal year 2000, the Company granted 35,222 restricted units of Company common stock. In connection therewith, the Company cancelled 12,113 performance shares and 8,074 performance units from the December 1, 1999 grant and replaced them with 9,182 units of restricted stock and with additional stock option awards. The restricted shares vest over four years. No future awards of long range performance shares or units are expected to be granted. DIRECTORS' RESTRICTED STOCK COMPENSATION The 1994 Incentive Plan provided for grants of shares of common stock equal to five years of directors' annual retainers to all non-employee directors, in lieu of cash. The directors' rights to the shares vest 20% on date of grant and 20% annually during the next four years. The directors are entitled to receive dividends and exercise voting rights with respect to all shares prior to vesting. Any unvested shares are forfeited if the director ceases to be a non-employee director for any reason. Effective March 25, 2000, this plan was amended to grant all non-employee directors shares of common stock equal to a one-year annual retainer. The directors' rights to the shares vest immediately on the date of grant. In 2000, 7,076 shares of Company common stock were issued under the amended plan. Subsequent to the end of fiscal year 2000, 452 shares were granted. Compensation expense for the plan totaled $184, $191 and $149 in 2000, 1999 and 1998, respectively. During 1999, 16,002 shares of Company common stock were issued under the plan of which 15,488 were cancelled in 2000 due to the plan amendment. During 1999, 1,321 shares from a prior year grant were forfeited. FAIR VALUE ACCOUNTING (SFAS 123) Had compensation expense for the Company's stock-based compensation plans been determined based on the fair value at the grant dates consistent with the method of SFAS 123, the Company's pro forma net earnings and diluted earnings per share would have been $39,520, $34,848 and $31,520 and $1.61, $1.43 and $1.28 for 2000, 1999 and 1998, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for 2000, 1999 and 1998. Adjustments for forfeitures are made as they occur. 2000 1999 1998 ---------------------------- Risk-free interest rate ............. 6.34% 4.87% 5.90% Expected dividend yield ............. 2.47% 2.35% 2.60% Expected volatility factor .......... 25.00% 24.50% 25.80% Expected option term (in years) ..... 7.0 7.0 7.0 The weighted average fair value per option at the date of grant for options granted in 2000, 1999 and 1998 was $5.28, $4.88 and $5.63, respectively. The above pro forma disclosures may not be representative of the effects on reported net income and earnings per share for future years because compensation cost under SFAS 123 is amortized over the options' vesting period and compensation cost for options granted prior to fiscal year 1996 is not considered. N. STOCK SPLIT, TREASURY STOCK TRANSACTIONS AND EARNINGS PER SHARE On March 24, 1998, the Company declared a three-for-two stock split in the form of a 50% stock dividend distributable April 24, 1998 to shareholders of record April 10, 1998. In connection therewith, the Company transferred $8,145 from retained 22 CLARCOR 8 - -------------------------------------------------------------------------------- earnings to common stock, representing the par value of additional shares issued. All share and per share amounts for all periods presented have been adjusted to reflect the stock split. During 1999 and 1998, the Company purchased and retired 50,000 and 528,691 shares of common stock, respectively. The number of issued shares was reduced as a result of the retirement of these shares. The Company calculates and presents basic and diluted earnings per share in accordance with Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share." Diluted earnings per share reflects the impact of outstanding stock options if exercised during the periods presented using the treasury stock method. The following table provides a reconciliation of the numerators and denominators utilized in the calculation of basic and diluted earnings per share.
2000 1999 1998 --------------------------------------- Net Earnings (numerator) ............... $ 40,237 $ 35,412 $ 32,079 Basic EPS: Weighted average number of common shares outstanding (denominator) .................... 24,269,675 23,970,011 24,268,250 Basic per share amount ........... $ 1.66 $ 1.48 $ 1.32 ======================================= Diluted EPS: Weighted average number of common shares outstanding ...................... 24,269,675 23,970,011 24,268,250 Dilutive effect of stock options .... 236,496 343,596 380,373 --------------------------------------- Diluted weighted average number of common shares outstanding (denominator) ................. 24,506,171 24,313,607 24,648,623 Diluted per share amount ......... $ 1.64 $ 1.46 $ 1.30 =======================================
For fiscal years ended November 30, 2000, 1999 and 1998, respectively, 682,866, 525,156 and 508,864 options with a weighted average exercise price of $19.34, $19.81 and $19.86 were not included in the computation of diluted earnings per share as the options' exercise prices were greater than the average market price of the common shares during the respective periods. O. UNAUDITED QUARTERLY FINANCIAL DATA The unaudited quarterly data for 2000 and 1999 were as follows: First Second Third Fourth Quarter Quarter Quarter Quarter Total ---------------------------------------------------- 2000: NET SALES ............ $150,697 $162,205 $160,830 $178,416 $652,148 GROSS PROFIT ......... 44,283 49,985 47,778 56,299 198,345 NET EARNINGS ......... 7,063 10,090 10,078 13,006 40,237 NET EARNINGS PER COMMON SHARE: BASIC .............. $ 0.29 $ 0.42 $ 0.41 $ 0.53 $ 1.66 DILUTED ............ $ 0.29 $ 0.41 $ 0.41 $ 0.53 $ 1.64 1999: Net sales ............ $ 99,166 $110,483 $112,090 $156,130 $477,869 Gross profit ......... 31,379 34,983 34,190 48,035 148,587 Net earnings ......... 6,210 8,650 9,736 10,816 35,412 Net earnings per common share: Basic ............. $ 0.26 $ 0.36 $ 0.41 $ 0.45 $ 1.48 Diluted ........... $ 0.25 $ 0.36 $ 0.40 $ 0.45 $ 1.46 Fiscal year 2000 was a fifty-three week year, whereas fiscal year 1999 was a fifty-two week year. Likewise, fourth quarter 2000 was a fourteen week quarter while fourth quarter 1999 was a thirteen week quarter. In addition, fourth quarter 1999 includes the acquisition of three industrial filtration businesses as discussed in Note B. P. SEGMENT INFORMATION The Company adopted Statement of Financial Accounting Standards No. 131 (SFAS 131), "Disclosures About Segments of an Enterprise and Related Information" effective with year-end 1999. This standard requires that companies disclose selected information by operating segment. SFAS 131 defines an operating segment as a component of a company which engages in business activities from which it may earn revenues and incur expenses; has its operating results regularly reviewed by the entity's chief operating decision makers to make decisions about the allocation of resources and the assessment of performance; and has discrete financial information available. Based on the economic characteristics of the Company's business activities, the nature of products, customers and markets served, and the performance evaluation by management and the Company's Board of Directors, the Company has identified three reportable segments: Engine/Mobile Filtration, Industrial/Environmental Filtration and Packaging. The Engine/Mobile Filtration segment manufactures and markets a complete line of filters used in the filtration of oils, air, fuel, coolant, hydraulic and transmission fluids in both domestic and international markets. The Engine/Mobile Filtration segment provides filters for certain types of transportation equipment including automobiles, heavy-duty and light trucks, buses and 23 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Dollars in thousands except per share data) locomotives, marine and mining equipment, industrial equipment and heavy-duty construction and agricultural equipment. The products are sold to aftermarket distributors, original equipment manufacturers and dealer networks, private label accounts and directly to truck service centers and large national accounts. The Industrial/Environmental Filtration segment manufactures and markets a complete line of filters, cartridges, dust collectors and filtration systems used in the filtration of air and industrial fluid processes in both domestic and international markets. The filters and filter systems are used in commercial and industrial buildings, hospitals, manufacturing processes, pharmaceutical processes, clean rooms, airports, shipyards, refineries, power generation plants and residences. The products are sold to commercial and industrial distributors, original equipment manufacturers and dealer networks, private label accounts, retailers and directly to large national accounts. The Packaging segment manufactures and markets consumer and industrial packaging products including custom-designed plastic and metal containers and closures and lithographed metal sheets in both domestic and international markets. The products are sold directly to consumer and industrial packaging customers. Subsequent to year-end 2000, the Company reached an agreement with a customer of its Packaging segment that will result in the early termination of a supply and license agreement. As a result of a settlement payment made by that customer in the first quarter 2001, the Packaging segment is expected to record increased revenue and operating profit in fiscal 2001. The segment's sales of plastic closures will be reduced beginning in 2001 as a result of the agreement. Net sales represent sales to unaffiliated customers. No single customer or class of product accounted for 10% or more of the Company's consolidated 2000 sales. Intersegment sales are not material. Assets are those assets used in each business segment. Corporate assets consist of cash and short-term cash investments, deferred income taxes, headquarters facility and equipment, pension assets and various other assets that are not specific to an operating segment. Unallocated amounts include interest income and expense and other non-operating income and expense items. The segment data for the years ended November 30, 2000, 1999 and 1998 were as follows: 2000 1999 1998 -------------------------------- Net sales: Engine/Mobile Filtration ............... $259,791 $238,680 $223,761 Industrial/Environmental Filtration .... 319,746 174,889 135,828 Packaging .............................. 72,611 64,300 67,184 -------------------------------- $652,148 $477,869 $426,773 ================================ Operating profit: Engine/Mobile Filtration ............... $ 49,162 $ 43,591 $ 38,983 Industrial/Environmental Filtration .... 18,433 5,120 6,966 Packaging .............................. 8,392 7,366 5,714 -------------------------------- 75,987 56,077 51,663 Other income (expense).................. (12,500) (462) (316) -------------------------------- Earnings before income taxes and minority interests .................. $ 63,487 $ 55,615 $ 51,347 ================================ Identifiable assets: Engine/Mobile Filtration ............... $144,563 $137,351 $128,618 Industrial/Environmental Filtration .... 271,669 241,471 72,289 Packaging .............................. 41,891 36,173 30,500 Corporate .............................. 43,807 57,996 74,359 -------------------------------- $501,930 $472,991 $305,766 ================================ Additions to plant assets: Engine/Mobile Filtration ............... $ 7,588 $ 13,115 $ 10,479 Industrial/Environmental Filtration .... 10,842 4,824 3,743 Packaging .............................. 8,045 3,217 1,258 Corporate .............................. 2,530 666 345 -------------------------------- $ 29,005 $ 21,822 $ 15,825 ================================ Depreciation and amortization: Engine/Mobile Filtration ............... $ 7,475 $ 6,944 $ 6,320 Industrial/Environmental Filtration .... 10,145 5,132 2,803 Packaging .............................. 2,832 2,742 2,749 Corporate .............................. 627 554 508 -------------------------------- $ 21,079 $ 15,372 $ 12,380 ================================ Financial data relating to the geographic areas in which the Company operates are shown for the years ended November 30, 2000, 1999 and 1998. Net sales by geographic area are based on sales to final customers within that region. 2000 1999 1998 -------------------------------- Net Sales: United States .......................... $532,210 $399,717 $355,522 Europe ................................. 60,250 35,984 29,505 Other international .................... 59,688 42,168 41,746 -------------------------------- $652,148 $477,869 $426,773 ================================ Plant assets, at cost less accumulated depreciation: United States .......................... $133,323 $119,196 $ 83,621 Europe ................................. 5,695 5,650 1,704 Other international .................... 1,103 1,180 1,064 -------------------------------- $140,121 $126,026 $ 86,389 ================================ 24 CLARCOR EX-13.(A)(VII) 11 c59555ex13-avii.txt REPORT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 13(a)(vii) REPORT OF INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- The Board of Directors and Shareholders CLARCOR Inc. Rockford, Illinois In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, shareholders' equity and cash flows present fairly, in all material respects, the consolidated financial position of CLARCOR Inc. and its subsidiaries at November 30, 2000 and November 30, 1999 and the consolidated results of their operations and their cash flows for each of the three years in the period ended November 30, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Chicago, Illinois January 8, 2001 EXHIBIT 13(a)(viii) MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING - -------------------------------------------------------------------------------- The management of CLARCOR is responsible for the preparation, integrity and objectivity of the Company's financial statements and the other financial information in this report. The financial statements were prepared in conformity with generally accepted accounting principles and reflect, in all material respects, the results of operations and the Company's financial position for the periods shown. The financial statements are presented on the accrual basis of accounting and, where appropriate, reflect estimates based upon judgments of management. In addition, management maintains a system of internal controls designed to assure that Company assets are safeguarded from loss or unauthorized use or disposition. Also, the controls system provides assurance that transactions are authorized according to the intent of management and are accurately recorded to permit the preparation of financial statements in accordance with generally accepted accounting principles. For the periods covered by the financial statements in this report, management believes this system of internal controls was effective concerning all material matters. The effectiveness of the controls system is supported by the selection and training of qualified personnel, an organizational structure that provides an appropriate division of responsibility, a strong budgetary system of control and a comprehensive internal audit program. The Audit Committee of the Board of Directors, which is composed of three outside directors, serves in an oversight role to assure the integrity and objectivity of the Company's financial reporting process. The Committee meets periodically with representatives of management and the independent and internal auditors to review matters of a material nature related to financial reporting and the planning, results and recommendations of audits. The independent and internal auditors have free access to the Audit Committee. The Committee is also responsible for making recommendations to the Board of Directors concerning the selection of the independent auditors. /s/ NORMAN E. JOHNSON /s/ BRUCE A. KLEIN /s/ MARCIA S. BLAYLOCK Norman E. Johnson Bruce A. Klein Marcia S. Blaylock Chairman, President and Vice President-Finance and Vice President, Controller Chief Executive Officer Chief Financial Officer January 8, 2001 25 EX-13.(A)(IX) 12 c59555ex13-aix.txt INFORMATION UNDER THE CAPTION "11-YR FIN. REVIEW" 1 EXHIBIT 13(a)(ix) 11-YEAR FINANCIAL REVIEW - --------------------------------------------------------------------------------
2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------- PER SHARE Equity .......................................................... $ 9.93 $ 8.77 $ 7.80 $ 7.06 Diluted Earnings from Continuing Operations ..................... 1.64 1.46 1.30 1.11 Diluted Net Earnings ............................................ 1.64 1.46 1.30 1.11 Dividends ....................................................... 0.4625 0.4525 0.4425 0.4350 Price: High ..................................................... 21.44 21.38 24.63 20.79 Low ...................................................... 16.06 14.25 14.25 13.33 - ----------------------------------------------------------------------------------------------------------------------- EARNINGS DATA ($000) Net Sales ....................................................... $ 652,148 $ 477,869 $ 426,773 $ 394,264 Operating Profit ................................................. 75,987 56,077 51,663 44,424 Interest Expense ................................................ 11,534 3,733 2,336 2,759 Pretax Income ................................................... 63,487 55,615 51,347 44,192 Income Taxes .................................................... 23,201 20,137 19,262 17,164 Income from Continuing Operations ............................... 40,237 35,412 32,079 26,918 Income from Discontinued Operations ............................. -- -- -- -- Cumulative Effect of Accounting Changes ......................... -- -- -- -- Net Earnings .................................................... 40,237 35,412 32,079 26,918 Basic Average Shares Outstanding ................................ 24,270 23,970 24,268 24,133 Diluted Average Shares Outstanding .............................. 24,506 24,314 24,649 24,344 - ---------------------------------------------------------------------------------------------------------------------- EARNINGS ANALYSIS Operating Margin ................................................ 11.7% 11.7% 12.1% 11.3% Pretax Margin ................................................... 9.7% 11.6% 12.0% 11.2% Effective Tax Rate .............................................. 36.5% 36.2% 37.5% 38.8% Net Margin-Continuing Operations ................................ 6.2% 7.4% 7.5% 6.8% Net Margin ...................................................... 6.2% 7.4% 7.5% 6.8% Return on Beginning Assets ...................................... 8.5% 11.6% 11.4% 10.1% Return on Beginning Shareholders' Equity ........................ 19.1% 19.0% 18.7% 17.4% Dividend Payout to Net Earnings ................................. 27.9% 30.5% 33.4% 38.2% - ----------------------------------------------------------------------------------------------------------------------- BALANCE SHEET DATA ($000) Current Assets .................................................. $ 230,479 $ 227,670 $ 168,173 $ 160,527 Plant Assets, Net ............................................... 140,121 126,026 86,389 82,905 Total Assets .................................................... 501,930 472,991 305,766 282,519 Current Liabilities ............................................. 97,826 97,475 61,183 54,237 Long-Term Debt .................................................. 141,486 145,981 36,419 37,656 Shareholders' Equity ............................................ 242,093 210,718 186,807 171,162 - ----------------------------------------------------------------------------------------------------------------------- BALANCE SHEET ANALYSIS ($000) Debt to Capitalization .......................................... 36.9% 40.9% 16.3% 18.0% Working Capital ................................................. $ 132,653 $ 130,195 $ 106,990 $ 106,290 Current Ratio ................................................... 2.4 2.3 2.7 3.0 - ----------------------------------------------------------------------------------------------------------------------- CASH FLOW DATA ($000) From Operations ................................................. $ 54,130 $ 38,642 $ 42,267 $ 41,632 For Investment .................................................. (42,125) (160,658) (19,290) (8,193) From/(For) Financing ............................................ (15,862) 103,501 (19,943) (21,850) Change in Cash & Equivalents .................................... (3,881) (18,576) 2,997 11,497 Capital Expenditures ............................................ 29,005 21,822 15,825 11,349 Depreciation & Amortization ..................................... 21,079 15,372 12,380 11,600 Dividends Paid .................................................. 11,207 10,814 10,717 10,290 Net Interest Expense ............................................ 10,836 2,282 1,053 1,739 Income Taxes Paid ............................................... 16,458 22,234 16,199 15,112 EBITDA(*)........................................................ 97,066 71,449 64,043 56,024 - -----------------------------------------------------------------------------------------------------------------------
(*) Operating profit before depreciation and amortization 26 CLARCOR 2 - --------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 - ---------------------------------------------------------------------------------------------- $ 6.46 $ 5.79 $ 5.18 $ 4.63 $ 4.39 $ 4.26 $ 3.73 1.07 0.97 0.87 0.72 0.66 0.78 0.80 1.07 0.97 0.89 0.72 0.56 0.79 0.85 0.4283 0.4217 0.4150 0.4067 0.4000 0.3667 0.3467 16.75 18.00 14.92 13.33 15.00 15.11 11.89 12.42 12.08 10.58 10.67 10.00 8.67 7.89 - ---------------------------------------------------------------------------------------------- $ 372,382 $ 330,110 $ 300,450 $ 253,211 $ 218,172 $ 213,999 $ 197,917 42,596 38,728 33,188 29,960 27,810 32,204 31,407 3,822 3,418 3,298 3,979 4,438 4,402 4,189 41,405 36,631 31,886 27,221 24,930 28,778 30,325 15,315 13,060 12,057 9,944 8,941 10,095 11,008 25,945 23,500 20,786 17,277 15,989 18,683 19,317 -- -- -- -- -- 297 1,200 -- -- 630 -- (2,370) -- -- 25,945 23,500 21,416 17,277 13,619 18,980 20,475 23,908 23,850 23,804 23,831 24,030 23,915 23,931 24,217 24,205 24,030 24,076 24,346 23,988 24,145 - ---------------------------------------------------------------------------------------------- 11.4% 11.7% 11.0% 11.8% 12.7% 15.0% 15.9% 11.1% 11.1% 10.6% 10.8% 11.4% 13.4% 15.3% 37.0% 35.7% 37.8% 36.5% 35.9% 35.1% 36.3% 7.0% 7.1% 6.9% 6.8% 7.3% 8.7% 9.8% 7.0% 7.1% 7.1% 6.8% 6.2% 8.9% 10.3% 10.6% 11.4% 11.2% 9.5% 7.6% 11.6% 14.0% 18.8% 19.1% 19.4% 16.4% 13.4% 21.3% 26.0% 36.7% 39.7% 43.0% 52.3% 65.8% 43.0% 37.6% - ---------------------------------------------------------------------------------------------- $ 140,726 $ 133,286 $ 109,992 $ 97,569 $ 105,067 $ 87,322 $ 83,988 84,525 73,047 58,787 53,839 42,324 52,324 47,498 267,019 245,697 206,928 191,657 181,660 179,337 164,294 51,297 49,841 43,926 37,647 30,559 25,977 25,783 43,449 41,860 25,090 32,650 38,534 45,406 44,363 154,681 138,144 122,801 110,299 105,460 102,000 89,076 - ---------------------------------------------------------------------------------------------- 21.9% 23.3% 17.0% 22.8% 26.8% 30.8% 33.2% $ 89,429 $ 83,445 $ 66,066 $ 59,922 $ 74,508 $ 61,345 $ 58,205 2.7 2.7 2.5 2.6 3.4 3.4 3.3 - ---------------------------------------------------------------------------------------------- $ 26,675 $ 21,092 $ 25,670 $ 20,727 $ 23,456 $ 19,012 $ 25,109 (18,934) (29,044) (1,159) (74) (7,737) (15,848) (9,689) (8,774) 7,226 (18,656) (22,772) (9,929) (8,059) (5,577) (964) (684) 5,912 (2,197) 5,811 (4,895) 9,843 22,230 14,471 12,119 10,776 8,290 10,804 9,685 10,704 9,145 8,166 7,227 8,387 7,722 7,565 9,512 9,330 9,201 9,036 8,958 8,165 7,708 2,991 2,560 2,750 3,104 4,140 3,280 3,657 11,230 11,939 10,194 10,059 11,200 9,693 10,811 53,300 47,873 41,354 37,187 36,197 39,926 38,972 - ----------------------------------------------------------------------------------------------
27 EX-13.(A)(X) 13 c59555ex13-ax.txt FINANCIAL REVIEW 1 EXHIBIT 13(a)(x) FINANCIAL REVIEW - -------------------------------------------------------------------------------- (Dollars in millions except per share data CLARCOR's operating results for fiscal 2000 were at record levels for sales, cash flow (EBITDA) and earnings. Fiscal 2000 included the full-year results from three industrial filtration companies (hereafter, the Industrial Filtration Acquisitions) that were acquired at the beginning of the fourth quarter 1999. These acquisitions increased CLARCOR's sales and operating profit, and after related interest and amortization expenses, also increased net earnings and diluted earnings per share in fiscal 2000, one year earlier than originally anticipated. Purchase accounting adjustments for the acquisitions were completed in the fourth quarter of fiscal 2000 as described in Note B to the Consolidated Financial Statements. The Company also made several smaller acquisitions in fiscal 2000 that were not material to the Company's results of operations in 2000. The Industrial Filtration Acquisitions and other fiscal 2000 acquisitions are included in the Industrial/Environmental Filtration segment. The information presented in this financial review should be read in conjunction with other financial information provided throughout this 2000 Annual Report. The following discussion of operating results focuses on the Company's three reportable business segments: Engine/Mobile Filtration, Industrial/ Environmental Filtration and Packaging. Fiscal 2000 was a fifty-three week year for the Company and fiscal years 1999 and 1998 were fifty-two week years. OPERATING RESULTS SALES Record net sales in fiscal 2000 of $652.1 million increased 36.5% from $477.9 million in fiscal 1999. Approximately $120 million of the increase from 1999 was due to the sales from the Industrial Filtration Acquisitions for the first nine months of fiscal 2000. In addition, each of the Company's segments reported increased sales from fiscal 1999. As a result, the 2000 sales increase was the 14th consecutive year of sales growth for the Company. Total net sales grew 12.0% in 1999 over the 1998 level of $426.8 million; 1999 sales included the Industrial Filtration Acquisitions for the fourth quarter only. Comparative net sales information related to CLARCOR's operating segments is shown in the tables below.
2000 VS. 1999 CHANGE ------------- NET SALES 2000 % TOTAL $ % - ---------------------------------------------------------------------------------- ENGINE/MOBILE FILTRATION ............... $259.8 39.9% $ 21.1 8.8% INDUSTRIAL/ENVIRONMENTAL FILTRATION .... 319.7 49.0% 144.8 82.8% PACKAGING .............................. 72.6 11.1% 8.3 12.9% --------------------------------------- TOTAL ............................... $652.1 100.0% $174.2 36.5% =====================================
1999 vs. 1998 Change ------------ NET SALES 1999 % TOTAL $ % - --------------------------------------------------------------------------------- Engine/Mobile Filtration ............... $238.7 49.9% $ 14.9 6.7% Industrial/Environmental Filtration .... 174.9 36.6% 39.1 28.8% Packaging .............................. 64.3 13.5% (2.9) -4.3% ------------------------------------- Total ............................... $477.9 100.0% $ 51.1 12.0% =====================================
The Engine/Mobile Filtration sales growth of 8.8% in 2000 from 1999 included increases for heavy-duty, light-duty and railroad filter products from both domestic and international markets. The segment's sales rose 6.7% in 1999 over the 1998 level. Sales increased in 2000 and 1999 primarily from new product introductions, additional OEM sales, and penetration into new domestic and international distribution channels, primarily through sales to quick lube and truck service centers, fleets and automotive parts buying groups. As a result, unit volumes increased in 2000 and 1999 and price increases were mostly offset by competitive discounts. The Company's Industrial/Environmental Filtration segment recorded an 82.8% increase in sales over 1999. Excluding acquisitions, the segment's sales increased in 2000 approximately 11% over fiscal 1999. This sales increase resulted from higher volumes for environmental air filtration products and electrostatic air quality products. The segment recorded a 28.8% increase in sales in 1999 over 1998. Excluding the Industrial Filtration Acquisitions, the 1999 sales increase over 1998 was less than 1%. Increased sales in 1999 for environmental air filtration products were offset in part by reduced sales for electrostatic air quality products. The additional growth in 2000 was anticipated for this segment as a result of increased customer demand for industrial and indoor air filtration products and from additional acquisitions, including the acquisition of two small distributors in the first quarter 2000. Sales for the Packaging segment increased 12.9% in fiscal 2000 from 1999 primarily as a result of increased demand for non-promotional metal packaging products and flat sheet decorating. The segment's focus on non-promotional packaging products includes metal closures for food and beverage containers, wire spools, and film and battery cartridges. The Packaging segment's sales decrease of 4.3% in 1999 was principally the result of lower promotional container sales and was offset in part by increased sales of plastic closures and containers. In fiscal 2001, the Packaging segment's sales are expected to reflect a continued increase in metal packaging and increased revenue from a settlement payment arising from the early termination of a supply and license agreement by a customer. OPERATING PROFIT The Company reported its eighth consecutive year of growth in operating profit for fiscal 2000 as operating profit increased 35.5% over 1999. Excluding the Industrial Filtration Acquisitions, operating profit increased approximately $11 million or 19% over fiscal 1999. Operating margin was 11.7% of sales in both fiscal 2000 and 1999 and reflects improved margins from 1999 for each of the business segments. Due to the significant increase in sales and operating profit from the Industrial/Environmental Filtration segment, the Company's overall margin remained constant at 11.7% because of the lower margin from that segment as compared to the Company's 7 2 FINANCIAL REVIEW - -------------------------------------------------------------------------------- (Dollars in millions except per share data) other segments. The Company's operating profit increased 8.5% in 1999 over 1998. Excluding the Industrial Filtration Acquisitions, operating profit increased approximately 6% in 1999 from 1998. Operating margin of 11.7% of sales in 1999 was lower than the 1998 level of 12.1% primarily as a result of lower margins from the Industrial/Environmental segment, due in part to the 1999 acquisitions. Gross margin in 2000 of 30.4% was lower than the 31.1% in 1999 and 31.7% in 1998 primarily as a result of the Industrial Filtration Acquisitions. In both 2000 and 1999, cost reductions, improved manufacturing productivity and the integration of acquired businesses positively impacted gross margin. These profit improvements offset, in part, cost increases the Company experienced for certain raw materials, competitive pricing pressure, and, particularly in fiscal 2000, energy and employee insurance costs. Selling and administrative expenses increased to $122.3 million from $92.5 million in 1999 primarily due to the 1999 acquisitions and related amortization charges and also new product development programs and sales activities. Selling and administrative expenses were $83.6 million in 1998, which included a $2.1 million charge related to an uncollectible customer account. Although foreign currency fluctuations reduced sales and operating profit in fiscal 2000, currency adjustments did not have a material impact on consolidated operating profit in 2000, 1999 or 1998. Comparative operating profit information related to the Company's business segments is as follows. 2000 VS. 1999 CHANGE ------------- OPERATING PROFIT 2000 % TOTAL $ % - -------------------------------------------------------------------------------- ENGINE/MOBILE FILTRATION .............. $49.2 64.7% $ 5.6 12.8% INDUSTRIAL/ENVIRONMENTAL FILTRATION ... 18.4 24.3% 13.3 260.0% PACKAGING ............................. 8.4 11.0% 1.0 13.9% ------------------------------------- TOTAL .............................. $76.0 100.0% $19.9 35.5% ===================================== 1999 VS. 1998 CHANGE -------------- OPERATING PROFIT 1999 % TOTAL $ % - -------------------------------------------------------------------------------- Engine/Mobile Filtration .............. $43.6 77.7% $ 4.6 11.8% Industrial/Environmental Filtration ... 5.1 9.1% (1.9) -26.5% Packaging ............................. 7.4 13.2% 1.7 28.9% ------------------------------------- Total .............................. $56.1 100.0% $ 4.4 8.5% ===================================== OPERATING MARGIN AS A PERCENT OF NET SALES 2000 1999 1998 - -------------------------------------------------------------------------------- Engine/Mobile Filtration .............. 18.9% 18.3% 17.4% Industrial/Environmental Filtration ... 5.8% 2.9% 5.1% Packaging ............................. 11.6% 11.5% 8.5% ------------------------------------- Total .............................. 11.7% 11.7% 12.1% ===================================== Operating profit for the Engine/Mobile Filtration segment increased to $49.2 million in 2000 from $43.6 million in 1999, an increase of 12.8%. Operating margin as a percent of sales improved to 18.9% from 18.3% in 1999 and 17.4% in 1998. In fiscal 2000, operating profit was negatively impacted by increased energy, labor and raw material costs and was favorably impacted compared to 1999 by reduced legal costs. In addition, the segment's increase in operating profit in both 2000 and 1999 resulted primarily from higher sales volumes, cost reductions, and productivity improvements that more than offset competitive pricing discounts and other cost increases. The segment's light- duty filter manufacturing facility has continued to improve each year and in 2000 operated at its highest levels of productivity since it was acquired in 1995. The Industrial/Environmental Filtration segment's operating profit of $18.4 million in 2000 increased significantly from $5.1 million in 1999. Approximately $9 million of the increase was due to the Industrial Filtration Acquisitions. The remaining increase of $4.3 million, or an increase of approximately 90%, was due to improvements in previously existing businesses. The increased profit in these businesses reflected a significantly higher sales volume of industrial and environmental air filtration products, improved manufacturing operations and significant overhead and administrative cost reductions, many of which were implemented beginning in fiscal 1999. These operating profit improvements in 2000 more than offset increased raw material, labor and energy costs and start-up costs related to a new facility. The segment's 1999 operating profit of $5.1 million was a decrease from the prior year level of $7.0 million. The 1999 operating profit included the fourth quarter 1999 acquisitions, but that increase was more than offset by lower profit due to manufacturing inefficiencies resulting from labor shortages and competitive pricing discounts. During fiscal 2000 and 1999, production was moved between plants that resulted in productivity improvements beginning in the fourth quarter of 1999. As a result of increased customer demand, an additional manufacturing facility for air filtration products began operations in Rockford, Illinois in August 2000 and early in fiscal 2001, another in Campbellsville, Kentucky. The Packaging segment's operating profit in fiscal 2000 increased to $8.4 million from $7.4 million in 1999, a 13.9% increase. This increase resulted from better capacity utilization, a significant increase in sales volume and reduced discretionary spending. The segment's 1999 operating profit of $7.4 million improved from $5.7 million in 1998. The segment's operating margin in 2000 was 11.6% and compares to 11.5% in 1999 and 8.5% in 1998. The 1998 level was reduced principally due to a $2.1 million charge for the write-off of an uncollectible customer account. Operating profit for the segment in fiscal 2001 will increase due to a settlement payment arising from the early termination of a supply and license agreement by a customer that is expected to more than offset reduced profit due to the shift in sales to 8 CLARCOR 3 - -------------------------------------------------------------------------------- additional metal packaging products, reduced sales of plastic products and start-up costs associated with the addition of new lithography equipment. This equipment is expected to be fully operational by the third quarter of 2001 at which time sales and profits are expected to improve. In addition, the segment's operating profit will be reduced as a result of increased pension costs in 2001 of approximately $0.7 million due to the completion in fiscal 2000 of the amortization of a gain on transition assets. OTHER INCOME & EXPENSE Net other expense totaled $12.5 million in 2000, $0.5 million in 1999 and $0.3 million in 1998. Interest expense increased in 2000 and 1999 due to the additional borrowings in the fourth quarter of 1999 for the Industrial Filtration Acquisitions. Interest expense totaled $11.5 million in 2000, $3.7 million in 1999 and $2.3 million in 1998. Interest income of $0.7 million in 2000 was reduced from $1.5 million in 1999 and $1.3 million in 1998 as a result of lower average cash and short-term cash investment balances primarily due to the use of cash for acquisitions in 1999. Currency losses increased to $1.2 million in 2000 from $0.1 million in 1999 primarily as a result of strengthening European currency exchange rates against the U.S. dollar throughout fiscal 2000. There were no significant gains or losses on the disposition of plant assets in fiscal 2000; however, gains of $1.7 million in 1999 and $1.3 million in 1998 were primarily from the sale of a building in each of the years. PROVISION FOR INCOME TAXES The provision for income taxes in 2000 of $23.2 million resulted in an effective tax rate of 36.5% which was just slightly higher than the effective tax rate of 36.2% in 1999. The effective rate was lower in 1999 than the rate of 37.5% in 1998 principally due to reduced state income taxes. The effective tax rate in 2001 is expected to be approximately the same rate as recorded in 2000. NET EARNINGS AND EARNINGS PER SHARE Net earnings were a record $40.2 million in 2000, or diluted earnings per share of $1.64, compared to $35.4 million, or $1.46 per diluted share in 1999. Net earnings and diluted earnings per share for fiscal 1999 included a gain from the sale of a building of $1.1 million, or $0.04, respectively. Diluted average shares outstanding for fiscal 2000 were 24,506,171 compared to 24,313,607 for 1999, an increase of 0.8%. Net earnings in 1999 of $35.4 million increased from the 1998 level of $32.1 million, or $1.30 diluted earnings per share based on 24,648,623 diluted average shares outstanding. FINANCIAL CONDITION CORPORATE LIQUIDITY The Consolidated Statements of Cash Flows are shown on page 15, and this discussion of corporate liquidity should be read in conjunction with information presented in those statements. Cash and short-term cash investments decreased to $10.9 million at year-end 2000 from $14.7 million at year-end 1999. Cash provided by operating activities totaled $54.1 million in 2000 compared to $38.6 million in 1999 and $42.3 million in 1998. Increased cash flow from net earnings, depreciation and amortization in 2000 was used for investment in assets, net of liabilities, which totaled $7.3 million. Accounts receivable and inventories increased during 2000 due to the higher level of business activity throughout the Company. Other current assets and pension liabilities were reduced in 2000 as restricted trust assets were used for the payment of nonqualified pension liabilities. Depreciation and amortization increased in fiscal 2000 and 1999 primarily due to the fourth quarter 1999 Industrial Filtration Acquisitions. The Company used cash of $42.1 million for investing activities in 2000, $160.7 million in 1999 and $19.3 million in 1998. Cash used for the acquisition of several small filtration businesses in 2000 totaled $12.7 million. In fiscal 1999, $142.7 million, net of cash acquired, was used for acquisitions, primarily the Industrial Filtration Acquisitions. In 1998, cash of $8.0 million was invested in several small acquisitions. Additions to plant assets in 2000 totaled $29.0 million and included payments on new state-of-the-art lithography equipment, the purchase and refurbishment of a manufacturing building in Campbellsville, Kentucky, and additional manufacturing capacity throughout the Company. Additions to plant assets in 1999 increased to $21.8 million from $15.8 million in 1998 as a result of adding plant capacity and the completion of an expansion to a manufacturing and distribution facility in Kearney, Nebraska. Cash of $3.9 million and $2.5 million was received in 1999 and 1998, respectively, from the disposition of plant assets, primarily from the sale of a building in each year. In 1998, cash of $2.5 million was received as payment on a note receivable. Net cash used in financing activities totaled $15.9 million in 2000. The Company borrowed a net additional $1.0 million against a revolving credit agreement during 2000. Net cash provided by financing activities in fiscal 1999 totaled $103.5 million and included $115.0 million in borrowings used for the Industrial Filtration Acquisitions. During 2000, the Company did not repurchase any shares under the remaining authorization of approximately 920,000 shares from the December 1997 Board of Directors' approved stock repurchase plan. However, the Company purchased 50,000 shares of CLARCOR common stock for $0.9 million in 1999 and 528,691 shares for $8.4 million in 1998. Dividend payments totaled $11.2 million, $10.8 million and $10.7 million in 2000, 1999 and 1998, respectively. Payments on long-term debt were $7.0 million in 2000, $0.5 million in 1999 and $2.7 million in 1998. CLARCOR's current operations continue to generate cash and sufficient lines of credit remain available to fund current operating needs, to pay dividends, to provide for additions and 9 4 FINANCIAL REVIEW - -------------------------------------------------------------------------------- (Dollars in millions accept per share data) the replacement of necessary plant facilities, and to service and repay long-term debt. EBITDA cash flow, or operating profit before depreciation and amortization, increased to $97.1 million in 2000 compared to $71.4 million in 1999. EBITDA is expected to increase to over $100.0 million in 2001 and capital expenditures are expected to be approximately $25.0 million. Due to the September 1999 Industrial Filtration Acquisitions, a $185.0 million multicurrency revolving credit facility was established with several financial institutions. Of the $185.0 million, a total of $116.0 million of the credit facility had been used as of year-end 2000 and $10.8 million was outstanding for letters of credit. Principal payments on long-term debt will be approximately $5.5 million in 2001 based on scheduled payments in current debt agreements. No payments are required in fiscal 2001 on the multicurrency revolving credit facility and the Company is in compliance with restrictive covenants related to the credit facility, as described in Note G to the Consolidated Financial Statements. It is possible that business acquisitions or dispositions could be made in the future that may require changes in the Company's debt and capitalization. CAPITAL RESOURCES The Company's financial position at November 30, 2000 continued to be sufficiently liquid to support current operations. Total assets increased to $501.9 million at the end of fiscal 2000, an increase of 6.1% from the year-end 1999 level of $473.0 million. Total current assets increased to $230.5 million from $227.7 million at year-end 1999 and total current liabilities increased to $97.8 million from $97.5 million at year-end 1999. The current ratio was 2.4 at year-end 2000 compared to 2.3 at year-end 1999. Accounts receivable and inventories increased during fiscal 2000 as a result of the increase in business and sales levels. Plant assets increased to $140.1 million as a result of additional capacity additions made during the year. Acquired intangibles increased to $101.9 million due to the acquisition of several filtration businesses during fiscal 2000. Current liabilities include accruals for costs related to litigation matters arising in the normal course of business. See Note K in the Notes to Consolidated Financial Statements for further information on these matters. Long-term debt of $141.5 million at year-end 2000 included the borrowing against the revolving credit facility, primarily for the Industrial Filtration Acquisitions. Shareholders' equity increased to $242.1 million from $210.7 million at year-end 1999. The increase in shareholders' equity resulted primarily from net earnings of $40.2 million offset by dividend payments of $11.2 million, or $0.4625 per share. The Company issued 160,704 common shares related to an acquisition in 2000 that increased shareholders' equity by $2.9 million. Long-term debt decreased to 36.9% of total capitalization at year-end 2000, compared to 40.9% at year-end 1999. At November 30, 2000, CLARCOR had 24,381,307 shares of common stock outstanding at $1.00 par value, compared to 24,019,722 shares outstanding at the end of 1999. OTHER MATTERS MARKET RISK The Company's market risk is primarily the potential loss arising from adverse changes in interest rates. The Company's long-term debt obligations are primarily at variable LIBOR-associated rates and fixed interest rates and are denominated in U.S. dollars. In order to minimize the long-term costs of borrowing, the Company manages its interest rate risk by monitoring trends in rates as a basis for determining whether to enter into fixed rate or variable rate agreements. In addition, during fiscal 2000 the Company entered into several interest rate agreements related to the revolving credit agreement as described in Note G to the Consolidated Financial Statements. Market risk is estimated as the potential change in fair value of the Company's long-term debt obligations resulting from a hypothetical 1% increase in interest rates. A hypothetical 1% increase in interest rates on the Company's variable rate agreements would adversely affect fiscal 2001 net earnings and cash flows by approximately $0.3 million and reduce the fair value of fixed rate long-term debt, as measured at November 30, 2000, by approximately $4.6 million. Last year, a hypothetical 1% increase in interest rates would have adversely affected fiscal 2000's net earnings and cash flows by approximately $1.0 million and reduced the fair value of fixed rate long-term debt by approximately $4.0 million. The Company places its short-term cash investments in high grade, primarily tax-exempt municipal securities. For the most part, the interest rates on these investments are reset weekly and consequently, the cost of these securities approximates market value. Although the Company continues to evaluate derivative financial instruments, including forwards, swaps and purchased options, to manage foreign currency exchange rate changes, the Company did not hold derivatives for trading purposes during 2000 or 1999. The company uses forward exchange contracts on a limited basis to manage foreign currency exchange risk related to certain transactions, primarily equipment purchases denominated in currencies other than U.S. dollars. As a result of increased foreign sales and business activities, the Company will continue to evaluate the use of derivative financial instruments to manage foreign currency exchange rate changes in the future. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 requires the recognition of all derivatives in the balance sheet as either an asset or a liability measured at fair value. The statement also requires a company to recognize 10 CLARCOR 5 - -------------------------------------------------------------------------------- changes in the derivative's fair value currently in earnings unless it meets specific hedge accounting criteria. The Company expects to adopt SFAS 133 in the first quarter of fiscal year 2001. Management does not expect the adoption of SFAS 133 to have a material impact on the Company's consolidated financial statements. The fair market value of derivative agreements was a negative $1.2 million at year-end 2000. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements," related to revenue recognition under generally accepted accounting principles in financial statements. The Company has performed a preliminary review of current revenue recognition practices. Additional review will continue throughout fiscal 2001, as compliance with SAB 101 is required for the Company no later than at the end of fiscal 2001. Until this review is complete there can be no final determination of its impact on the Company's future revenue recognition practices. OUTLOOK The Company's long-term objective continues to be to increase diluted earnings per share by 10% to 15% per year. This objective was achieved in fiscal 2000 and in 1999, and it remains the objective for fiscal 2001. The Company's Total Filtration Program that was started in fiscal 2000 is expected to continually add to sales levels in the Company's two filtration segments over the next several years. The Total Filtration Program is expected to serve as an added distribution channel for all of the Company's filtration products. The Engine/Mobile Filtration segment is expected to continue to increase sales and profit by providing outstanding customer service, introducing new products and expanding marketing programs. The Industrial/Environmental Filtration segment is expected to grow sales and profits as a result of continued expansion of sales programs throughout various distribution channels and most importantly, by continuing to achieve synergies and cost savings from integrating production facilities and processes. This segment continues to have the most potential for improved operating margins over the next few years although this continues to be a highly competitive industry. The Packaging segment's focus on non-promotional metal decorating sales is expected to increase utilization of both the new lithography equipment and current capacity by the end of fiscal 2001. Due to increased metal packaging sales and the settlement payment related to the early termination of a customer agreement, overall sales and operating profit for the segment are expected to be higher in fiscal 2001 than in 2000. The Company will continue to implement cost reductions and productivity improvements, although competitive pricing pressure, increases in raw material, labor, health care and energy costs, and worldwide business conditions may reduce the overall profit improvement. Capital investments will continue to be made in each segment's facilities during 2001 to improve productivity and support new product introductions. It is expected that the investments made in fiscal 2000 and additional investments planned in 2001 for new manufacturing facilities and production lines will become operational quickly and efficiently. While the Company fully anticipates that sales and profits will improve as a result of these efforts, the Company has made contingency plans to reduce discretionary spending if industry and economic conditions change. The Company continues to look at acquisition opportunities, primarily in related filtration businesses. It is expected that these acquisitions would expand the Company's market base, distribution coverage and product offerings. The Company has established financial standards that will continue to be vigorously applied in the review of all acquisition opportunities. Additionally, even though debt was significantly increased in 1999 due to the Industrial Filtration Acquisitions, the Company believes that it has sufficient additional borrowing capacity to continue this acquisition program. FORWARD-LOOKING STATEMENTS Certain statements quoted in this Annual Report are forward-looking. These statements involve risk and uncertainty. Actual future results and trends may differ materially depending on a variety of factors including: the volume and timing of orders received during the year; the mix of changes in distribution channels through which the Company's products are sold; the timing and acceptance of new products and product enhancements by the Company or its competitors; changes in pricing, labor availability and related costs, product life cycles, raw material costs, energy costs and purchasing patterns of distributors and customers; competitive conditions in the industry; business cycles affecting the markets in which the Company's products are sold; the effectiveness of plant conversions, plant expansions and productivity improvement programs; the management of both growth and acquisitions; the fluctuation in foreign and U.S. currency exchange rates; the fluctuation in interest rates, primarily LIBOR, which affect the cost of borrowing under the revolving credit facility; extraordinary events such as litigation, acquisitions or divestitures including related charges; and economic conditions generally or in various geographic areas. All of the foregoing matters are difficult to forecast. The future results of the Company may fluctuate as a result of these and the other risk factors detailed from time to time in the Company's filings with the Securities and Exchange Commission. Due to the foregoing items, it is possible that, in the future, the Company's operating results will be below the expectations of stock market analysts and investors. In such event, the price of CLARCOR common stock could be materially adversely affected. 11 EX-21 14 c59555ex21.txt SUBSIDIARIES 1 EXHIBIT 21 CLARCOR INC. SUBSIDIARIES AS OF FEBRUARY 23, 2001
JURISDICTION OF INCORPORATION OR PERCENT OF NAME ORGANIZATION OWNERSHIP* - -------------------------------------- ---------------- ---------- CLARCOR Consumer Products, Inc. Delaware 100% J.L. Clark, Inc. Delaware 100% Clark Europe, Inc. Delaware 100% CLARCOR Filtration Products, Inc. Delaware 100% Airguard Industries, Inc. Kentucky 100% Airklean Engineering Pte. Ltd. Singapore 100% Airguard Asia Sdn. Bhd. Malaysia 100% Purolator Products Air Filtration Company Delaware 100% Baldwin Filters, Inc. Delaware 100% Baldwin Filters N.V. Belgium 100% Baldwin Filters Limited United Kingdom 100% Baldwin South Africa, Inc. Delaware 100% Baldwin-Unifil S.A. South Africa 80% Hastings Filters, Inc. Delaware 100% Hastings Filters Ltd. Canada Canada 100% Baldwin Filters (Aust.) Pty. Limited Australia 100% Clark Filter, Inc. Delaware 100% Filtros Baldwin de Mexico Mexico 90% Purolator Facet, Inc. Delaware 100% Facet FCE S.A.R.L. France 100% Facet Iberica S.A. Spain 100% Facet Industrial B.V. Netherlands 100% Facet Industrial U.K. Limited United Kingdom 100% Facet International S.A. Switzerland 100% Facet Italiana, S.p.A. Italy 100% Facet USA Inc. Delaware 100% Filter Products, Inc. California 100% GS Costa Mesa, Inc. Delaware 100% Purolator Filter GmbH Germany 100% United Air Specialists, Inc. Ohio 100% United Air Specialists (U.K.) Ltd. United Kingdom 100% CLARCOR International, Inc. Delaware 100% Baldwin-Weifang Filters Ltd. China 75% CLARCOR Foreign Sales Corporation Barbados 100% CLARCOR Trading Company Delaware 100%
- ------------------------------ * Direct or indirect EX-23 15 c59555ex23.txt CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in each Registration Statement on Form S-8 (file numbers 33-5456, 33-38590, 33-39374, 33-53763 and 33-53899) of CLARCOR Inc. and Subsidiaries of our report dated January 8, 2001 relating to the consolidated financial statements, which appears in the Annual Report to Shareholders, which is incorporated by reference in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated January 8, 2001 relating to the financial statement schedule, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP Chicago, Illinois February 23, 2001 -----END PRIVACY-ENHANCED MESSAGE-----